Deferred Payroll Taxes

Are you an employer that allowed your workers to defer their payroll taxes in 2020 into the year 2021? Or are you an employee whose employer allowed you to defer these amounts and you’re wondering now when those taxes need to be withheld and paid?

The Cares Act of 2020 allowed employers to offer this benefit to employees giving them more cash in their paychecks that would help them through this difficult time the pandemic had brought about. But that deferral period ended as of December, 2020, and as of 2021, those taxes that had been deferred must be repaid this year.

Employers are responsible for withholding additional tax from their employees’ paychecks on top of the regular amount that is currently due with that pay period. These taxes need to be paid separately from the regular payroll tax deposits. If you include the total amount as a tax deposit, it will be assumed that these amounts are for the current tax period rather than the deferral.

The EFTPS will soon have an option to select deferral payment, but you can also pay with a check, money order, credit or debit card. Payments should be submitted as they are withheld from employee’s pay.

If you haven’t already begun to withhold the tax due, it’s time to start by adding a portion of the tax due to their current deductions in the employees’ paychecks so that you can recoup the total liability from staff, and it isn’t too much of a burden on them to have the additional deduction from their paychecks. If your employee no longer works for you, or doesn’t pay back the full balance due, you as the employer are responsible for paying those payroll taxes back.

If you have questions regarding the deferral and how to handle this, you can contact the IRS at 800-555-4477 or your payroll processing company for more information.