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Deferral of SE tax

My understanding of the whole "deferral of FICA tax" COVID thing was that it was an option, not required, and that it was probably best NOT to opt in, unless the employer was financially hurting, and needed the extra time to pay those taxes. That's what I was hearing from several colleagues.

But now, filling out self-employment clients' returns, it seems that SE clients are being REQUIRED to defer their SE tax? Am I missing something? Did I do all the payroll wrong the last 3 quarters? If I'm correct that this is optional, how do I opt out of it on the Form SE? (Or is it only optional if you're incorporated, and not optional if you're self-employed?)

Great Hera, this is going to be a crazy year. Is it too late to retire?

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29 Replies 29
Level 15
Level 15
not required, just enter 0 on Line 18 of the SE worksheet

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪


Max deferral line 18 is too large

i have entered 0 but it keeps saying 


Max deferral line 18 is too large

any help with that?

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What i ended up doing was living it blank and so i was able to finish it.

Level 15

Are you using ProSeries to prepare your clients' tax returns? If not, you seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte , and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Thanks.

 

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I'm not sure who this was directed to?

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Level 2

Sorry, a bit late response, but that's what I did too- just left it blank, and was able to go forward.

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Level 15

Sch SE deferral for a sole proprietor has *nothing* to do with payroll tax returns.

Apples/Oranges

Former Chump..umm... AllStar.
"the game of life is hard to play"

If a post answers your question, click on *Accept as solution* for future searches

Hi abctax55. I guess I wasn't clear.

If an employer were going to defer, that deferral would happen on the payroll tax return (Form 941). So I was nervous, thinking that if the deferral was required, then I filed all my 941s wrong.

The Form SE says "Enter the portion of line 3 that can be attributed to March 27, 2020, through December 31, 2020." It isn't phrased in such a way that it sounds optional. The software doesn't phrase it in such a way that makes it sound optional. If I enter 0, that makes it sound like all their self-employment was between January 1 - March 26, which is false. Call me paranoid, but I get nervous putting something on a tax form that isn't true.

But if y'all tell me that I can put 0 there, I'll put 0 there.

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Level 15
Level 15

Maybe I need to go back and read it again, I just know putting zero made none of it be deferred LOL


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 15
Level 15

OK, I see how to get rid of the deferral I think.  Putting 0 on Line 18 of that form isnt correct.

Go to the 1040/1040SR worksheet and scroll down to the Deferral for Certain Sch H and SE Filers smart worksheet looking box, Line 11 put a zero and nothing will flow to Sch 3 Line 12e.

If you do choose to defer, Im not seeing a spot on the Carryover worksheet for the deferred portion to carryover to 2021, so I dont think this part of the program is completely updated yet.

 


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Level 11

Good job Lisa!

I just went down that rabbit hole and tried to follow the flow on all of the forms.  You end up in a worksheet on the 1040 instructions to Schedule 3.  Line 10 says:

"You can defer payment on up to the amount on line 10 until 12/31/2021
or 12/31/2022 by reporting the amount on line 10 above (or a smaller amount)
on line 12e of Schedule 3 (Form 1040)"

and then Line 11 of that worksheet:

"Enter the amount you reported on Schedule 3, line 12e"

Are we having fun yet!?!

Edit: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

See PDF page 102.

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Level 15
Level 15
Did you see anywhere that the carryover to 2021 or 2022 is recorded? Feels like its missing some pieces still.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 11

Same worksheet, lines 13 and 14.

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Level 15
Level 15
But thats not on the actual return, its not even an actual worksheet, is it?

If you pick up a new client in 2021 or 2022, how will you know if they had this deferral?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 11
If you pick up a new client in 2021 or 2022, how will you know if they had this deferral?

Best I can tell, there's no way to know.  I did find this section in the instructions for Schedule 3 Line 12e interesting:

"If you file Schedule H or Schedule SE, you can defer some of the
household employment and self-employment tax payments you may owe on
your 2020 tax return and pay them later
instead. However, you can't defer
amounts that you have already paid."

Does that mean they'll use any refund on the 1040 to offset the deferral?  What a mess!

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Level 15
Level 15

Oh, I guess if you pick up a new client and you see a figure on 2020 Sch 3 Line 12e, then you know that 2021 and 2022 will have the same figure.

I will NOT be encouraging any of my clients to defer these taxes.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Level 15

"If an employer were going to defer, that deferral would happen on the payroll tax return"

And that wording also warns the employer that any amounts already paid in through the 941 deposit process cannot be refunded for that period where you would have wanted to keep the money (defer deposit), as an afterthought process (when filing the form 941 or 944).

" "However, you can't defer amounts that you have already paid."

Does that mean they'll use any refund on the 1040 to offset the deferral?"

It means the other way around. Think of this as a step towards parity for the self-employed to get to the same place as employers and employees for these deferrals.

"30. Is a self-employed individual who defers 50 percent of the Social Security tax on net earnings from self-employment income, or a household employer that defers the employer's share of Social Security tax under section 2302 of the CARES Act, eligible for a refund of the deferred amount of tax at the time the taxpayer files its Form 1040, Individual Tax Return? (added July 30, 2020)

Generally, no. A taxpayer who has deferred his or her payment of the employer's share of Social Security tax or 50% of the Social Security tax on net earnings from self-employment under section 2302 of the CARES Act is not eligible for a refund due to the deferral because the deferral amount is a deferral of payment, not a deferral of liability. Therefore, the deferral itself does not result in an overpayment of taxes reported on Form 1040. However, if a household employer is eligible for advanceable paid leave credits under the FFCRA and reports those credits on Schedule H, Form 1040, the taxpayer may receive a refund of the paid leave credits even while deferring the employer's share of Social Security tax. This does not apply to credits for sick leave and family leave equivalent amounts for self-employed individuals.

Self-employed individuals and household employers should consider deferrals under section 2302 of the CARES Act in determining their estimated tax payments and any income tax withholding from wages and other sources of income. Publication 505, Tax Withholding and Estimated Tax for use in 2020 provides more details on determining these amounts."

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It is on the actual form -- Schedule SE, lines 18-23. If they deferred anything, it would show up there. If they didn't defer, that section would be $0. 

Still, what a mess. 

That's why we get the big bucks.

Level 11
Level 11

These are the 2020 instructions for form SE from IRS

Changes to Schedule SE (Form 1040).
New Part III has been added to Schedule SE to allow self-employed persons
to figure a maximum amount of self-employment tax payments which may be
deferred. All maximum deferral amounts will be carried to Schedule 3
(Form 1040), and the total amount that you may elect to defer may be further reduced.

Seems like section 3 is for folks that want a deferral, and if so fill out section 3. Personally I am only going to fill it out if someone wants a deferral. 

I think some of you are making it more complicated than is necessary. Just my 2 cents 

Level 15
Level 15
Sticking a zero in on the SE is easier anyhow.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 2

Just has this issue with line 11. It does not allowing put "0". Does not like it. I am breaking my head. Client does not want to defer anything. and his line 10 ended up being negative number. Anyone experienced this yet?

Level 2

Just got this myself filing taxes, line 10 is negative.... appreciate anyone's help on this. It won't let me complete the review until this is fixed up otherwise tells me to submit via mail. 😞

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Level 2

Got my answer on another thread. leave it blank!

im not sire where im suppose to ask a question. i messed up on my refund i thought i was suppose to enter the amount in that time period i made on line 18. an now im worried will my tax return be takin

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Level 15

@angeldfj050818 

"im not sire where im suppose to ask a question."

Not here, unless you are using the ProSeries tax preparation program to prepare your clients' tax return.

Otherwise, no one is using the program you are using, whatever it is.

You seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte , and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Thanks.

 

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Does anyone know if we can add to the standard letter to show there has been a deferral of SE Tax until 12/31/21 and 12/31/22 and to show what the payments will be and when they need to be paid?  How will the client know what was deferred and when to pay, etc.?

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Level 1

Line 18 will determine if you would like to have more time to pay your self-employment tax ( Eligibility is based on whether you paid household employees or had self employment income, when you earned that income, and whether you owe taxes this year.) If you enter a number there you will have time to pay self-employment tax on a later date. Therefore enter 0 in line 18 and you will be opting out of this option. 

On another note if you did not earn self-employment income or pay household employees in 2020, you are not eligible for this deferral.

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Level 15

@Singing Tax Lady 

"I'm not sure who this was directed to?"

 

Your topic here for how to use ProSeries for the client's data, has now been hijacked by what appears to be TurboTax users. They seem to be trolling the Lacerte, ProSeries and ProConnect community.

They don't seem to realize that to Help Each Other, as a Community, they should go to the TurboTax Community forums, here:

https://ttlc.intuit.com/community/discussions/discussion/03/302

 

And instead, are interfering with your ability to do your job for your clients.

 

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i added my actual income in that line im so worried will they take my return?

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