Employers Have Additional Time to Withhold Deferred Social Security Taxes from 2020
By: Michael J. Tedesco
The IRS released Notice 2021-11 on January 19, 2021 addressing how employers who elected to defer certain employees’ Social Security taxes (“Applicable Taxes”) can withhold and pay those taxes throughout the 2021 calendar year.
On August 8, 2020, President Trump issued a Memorandum directing the Treasury Secretary to use his authority under I.R.C. Section 7508A, which allows the Secretary of the Treasury to postpone the time for performing certain acts for a taxpayer determined by the Secretary to be affected by a Federally declared disaster, to allow for the postponement of withholding and payment of the Applicable Taxes from certain employees. In Notice 2020-65, the IRS postponed the due date for certain employees’ Social Security taxes until the period beginning on January 1, 2021 and ending April 30, 2021. This notice applied to employees whose bi-weekly pay was less than the threshold amount of $4,000. This amount was to be determined on a pay period-by-pay period basis.
Section 274 of the COVID-related Tax Relief Act of 2020 allowed the withholding and payment of those taxes through December 31, 2021. Notice 2021-11 requires that an Affected Taxpayer withhold and pay the Applicable Taxes deferred under Notice 2020-65 ratably from wages and compensation paid between January 1, 2021 and December 31, 2021. If such withholding and payment does not occur, penalties and interest will begin to accrue on January 1, 2022 for any portion of the unpaid Applicable Taxes.
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