Level 5

Question

Schedule C Maximum Deferral of tax line 18

Forum|Forum|5 years ago
January 7, 2021
25 replies
63 views

There seems to be a new question for the Schedule C section this year due to the covid. Part 3 line 18 want you to input a number??? How did the covid effect your business from March 2020 through December 2020 for self employment, what is the calculation for this input?

ProSeries Basic

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athaureaux6

Level 7

Hi Brainstorm,

This is a new tax deferral (temporarily) of the part of the SE tax corresponding to the part of the Social Security portion. Many tax professionals are cautious about this because it will have to be paid in 2021 and 2022 and it could cause a higher tax burden for many taxpayers. Just be cautious, it may reduce your tax this year but it can increase your taxes in the near future. But you are right, the software will ask you, I and many professionals I have spoken to, will enter 0 on Line 18 so nothing will change. Hope this helps.

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athaureaux6

Level 7

Also you will have to take the net income profit and you will allocate the part corresponding to March 27 to December 31. For example, if you have a net profit of 5000 , you divide that by 365 days you will get around 14 dollars per day, so from March 27 to december 31, there are approximately 288 days times 14 you will enter 3945. The software will calculate the rest. As I said before, be cautious with this deferral unless the taxpayer agrees and understand it. Hope you understand. I did my best.

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Pink_Floyd

Level 2

Explained to the T. I filed earlier today and entered 0 because I did not want any discrepancies over my taxes. I'll pay what I need when I need to pay it, (I sleep better when I don't owe anything to anyone). But I wanted to double check and that's what I needed to hear, thank you! 🙃

qbteachmt

Level 15

"to be a new question for the Schedule C"

To clarify, then; this is on the Sched SE.

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rbynaker

Level 13

@Brainstrom wrote:
There seems to be a new question for the Schedule C section this year due to the covid. Part 3 line 18 want you to input a number??? How did the covid effect your business from March 2020 through December 2020 for self employment, what is the calculation for this input?

The draft instructions to Schedule SE indicate that you can use "any reasonable method" including prorating the income by the number of days before/after 3/27/20.

https://www.irs.gov/pub/irs-dft/i1040sse--dft.pdf

So 76.503% unless you really want to do a lot more work to figure the interest-free loan. I plan to generally discourage this but there may be a few clients who will want to do it anyway.

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acctdept

Level 3

So there is no where to "check a box" to opt out of the social security tax deferral? You just enter in 0 for the allocation?

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athaureaux6

Level 7

I think so. I looked for that but I did not find and I input a 0 and it did not change any calculation. That is why I am planning to do that after I explain the self employed people about this new tax deferral tool.

Have a great day.

qbteachmt

Level 15

"after I explain the self employed people about this new tax deferral tool."

Just like the employees whose employer forced them to defer SS and now their paychecks will take a double-hit for the collection of the deferral along with their current amounts owed. And that's if the employer still has the same people employed, or has anyone employed, and/or can even collect what is owed from last year. And then they need to issue amended/corrected/updated W2 for 2020. What fun.

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Accountant-Man

Level 13

There is no part 3 line 18 on Schedule C. YOU MEAN SCHEDULE SE.

** I am "Elevating with Intention!"

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Tj2021

Level 2

This is my exact question the system wouldn’t let me get past it and I was afraid to enter any number in that box because I’ve found it difficult to retrieve it once you enter wrong info. It is the Schedule SE line 18. After 3 hours I’ve given up on what to put and what exactly it means . Comments on here were very helpful thank you !

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CristalG

Level 2

Hi did you figure this out already? It give me the same issue but I was guided by a live person and they told me to enter 0 to help me pass this step. But now I am worried for my return to be Audited if this is a mistake I really hope my return is not affected because of this.

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yanezam

Level 2

If you put Zero that will reduce the amount of the refund, if you allocate the amount from March to December line 26 will give you a figure(amount) I've had several clients call me to that there refund has been less than what proseries show's I asked what amount they got and it was minus the amount shown on line 26. Has anyone had the same issued?

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Powerfultaxman

Level 2

This has happened twice to me so far. That’s why I’m here.

qbteachmt

Level 15

There are many reasons why a refund might be lower than expected. The IRS has the info.

https://www.irs.gov/refunds/tax-season-refund-frequently-asked-questions

"Why is my refund different than the amount on the tax return I filed? (updated 2/5/2021)

All or part of your refund, including any amount for the Recovery Rebate Credit, may have been used (offset) to pay off past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or other federal nontax debts, such as student loans. To find out if you may have an offset or if you have questions about an offset, contact the agency to which you owe the debt.

We also may have changed your refund amount because we made changes to your tax return. This may include corrections to any incorrect Recovery Rebate Credit amount. You’ll get a notice explaining the changes. Where’s My Refund? will reflect the reasons for the refund offset when it relates to a change in your tax return.

Tax Topic 203, Refund Offsets for Unpaid Child Support, Certain Federal and State Debts, and Unemplo... has more information about refund offsets."

Here's the reason it would be reduced in reference to SE deferral. That's not a Creditable Refund; it's a deferral for something not yet paid, so it isn't also considered past due.

It's part of parity for the Self-employed to be treated as employers are treated for the Form 7200 provision.

"Employers that have already deposited all or any portion of the employer's share of Social Security tax during the payroll tax deferral period may not subsequently defer payment of the tax already deposited and generate an overpayment of tax"

"Employers that have already paid the employer's share of Social Security tax on wages during the payroll tax deferral period may not subsequently defer the payment of the tax"

Remember that SE = both an employer and an employee for purposes of the Social Security tax.

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