Employers who chose to defer withholding certain employee taxes during the last quarter of 2020 will have all of 2021 to pay the deferred taxes.

The IRS said it was extending the date to pay the deferred taxes from the original May 1, 2021 deadline to Dec. 31, 2021.

An August 2020 Trump administration executive order allowed employers to defer payroll taxes from Sept 1. through Dec. 31, 2020.

The executive order applied to the 12.4% Social Security tax that employers and employees pay.

Under the order, employers could stop withholding the 6.2% share from certain workers but continue paying their 6.2% share.

The deferral applied to workers who earned less than $4,000 in pre-tax, bi-weekly pay, or $104,000 a year.

But an employee who earned more than $4,000 in one pay period was eligible for deferral in the next pay period if pre-tax earnings fell below the threshold.

Employer Responsibility

Any employer who participated in the deferral must now determine how to collect and pay the deferred taxes.

One option is to withhold the amount from employees throughout 2021 to lessen the hit to their paychecks.

The payback period was extended Dec. 27, 2020 when the president signed the Consolidated Appropriations Act of 2021 into law.

Payments employers make by Jan. 3, 2022 will be considered timely because Dec. 31, 2021 is a legal holiday, the IRS said.

Penalties and interest will start to apply on Jan. 1, 2022 for any unpaid balances.

The IRS advises employees who had taxes deferred to check with their employer or their employer’s payroll point of contact for information on the collection schedule and how it will impact their pay.