In August of 2020, the Memorandum on Deferring Payroll Tax Obligations allowed employers to elect to defer the certain employee’ taxes from paychecks during the September 1, 2020, to December 31, 2020 period. While the Memorandum greatly benefited those who needed the increased income temporarily, many individuals expressed their concerns about the date that the deferred taxes would need to be paid.
In the early phases of discussing the deferred taxes, employers who elected to defer the employees’ taxes were instructed to withhold and pay the deferred taxes during the period beginning on January 1, 2021 and ending on April 30, 2021. However, in a recent update from the IRS, the due date for the deferred taxes has been extended. The deferred taxes should be withheld and paid ratable during the period of January 1, 2021 to December 31, 2021. Since December 31, 2021 is a legal holiday, payments made by January 3, 2022 will be considered timely.
Since the due date for the deferred taxes has been prolonged, interest and penalties associated with the deferred taxes have also been extended. Interest and penalties will begin on January 1, 2022. Employers should refer to the IRS website for more updates regarding the tax relief and extended due dates to ensure the deferred taxes are paid on time and penalties are not incurred.