The Internal Revenue Service reminds employers and self-employed individuals that chose to defer paying part of their 2020 Social Security tax obligation that a payment is due Today, Jan. 3, 2022.
Most affected employers and self-employed individuals received reminder billing notices from the IRS. The agency noted, however, that those affected are still required to make the payment on time, even if they did not receive a bill.
To give people a needed temporary financial boost, the Coronavirus, Aid, Relief and Economic Security Act allowed employers to defer payment of the employer’s share of Social Security tax. IRS Notice 2020-65 and allowed employers to defer withholding and payment of the employee’s Social Security taxes on certain wages paid in the calendar year 2020.
Employers must pay back these deferred taxes by their applicable dates.
The employee deferral applied to people with less than $4,000 in wages every two weeks, or an equivalent amount for other pay periods. It was optional for most employers, but it was mandatory for federal employees and military service members.
Repayment of the employee’s portion of the deferral started on Jan. 1, 2021, and continued through Dec. 31, 2021. Payments made by Jan. 3, 2022, will be timely because Dec. 31, 2021, was a holiday. The employer should send repayments to the IRS as they collect them. If the employer does not repay the deferred portion on time, penalties and interest will apply to any unpaid balance.
Employees should see their deferred taxes in the withholdings from their pay. They can check with their organization’s payroll office for details on the collection schedule.
As part of the COVID relief provided during 2020, employers and self-employed people could choose to put off paying the employer’s share of their eligible Social Security tax liability, normally 6.2% of wages. Half of that deferral is now due on Jan. 3, 2022, and the other half on Jan. 3, 2023.
Under separate COVID relief, employers could choose to forgo withholding Social Security taxes from eligible employees, and instead withhold tax this year and then pay those amounts to the IRS. For details, visit What employers need to know about repayment of deferred payroll taxes on IRS.gov, according to an IRS news release.
How to Repay the Deferred Taxes
Employers and individuals can make deferral payments through the Electronic Federal Tax Payment System or by credit or debit card, money order, or with a check. To be sure these payments are credited properly, they must be made separately from other tax payments.
EFTPS has an option to make a deferral payment. On the Tax Type Selection screen, choose Deferred Social Security Tax and then change the date to the applicable tax period (typically, the calendar quarter in 2020 for which tax was deferred). Visit EFTPS.gov, or call 800-555-4477 or 800-733-4829 for details.
Individual taxpayers can also use Direct Pay, available only on IRS.gov. Select the “balance due” reason for payment. If paying with a debit or credit card, select “installment agreement.” Apply the payment to the 2020 tax year where the payment was deferred.