Level 3

Question

SELF EMPLOYED SCH-SE-T

Forum|Forum|5 years ago
March 3, 2021
9 replies
61 views

Hello,

I need a little help. I have been doing taxes so far this year and most of my clients haven decided to take the self employed tax deferral on Sch SE-T. Fast forward, now they are calling me telling me that their refunds are less than what their return had said.

My question is, Why is this happening? The worksheet is kind of confusing but I thought it was an option for self employed clients to take this deferral. Am I missing something here?

I am pretty sure the IRS is denying them the deferral because I have gone back in and removed the amount on line 18 and it is showing the amount the IRS actually sent them.

ProSeries Professional

This topic has been closed for replies.

rbynaker

Level 13

My guess is you're trying to defer taxes that were already paid. You can reduce the amount due and defer payment to 12/31/21 and 12/31/22 but you can't increase a refund by taxes already paid.

From the 1040 instructions to Schedule 3 (2020 PDF page 100😞

"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."

Rick

Just-Lisa-Now-

Intuit Community Champion

You'll probably want to see the letter of explanation that should arrive in the weeks following the refund, just to be sure of whats happeing.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

Just-Lisa-Now-

Intuit Community Champion

Going to be seeing lots of these questions being asked! What a mess to keep track of!

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

D

DannyA

Level 2

I am experiencing the same thing. This deferral is the EE portion of the Self Employment tax once the NET income is multiplied by 92.35%. The IRS stopped honoring this Covid provision, or their internal systems began disallowing this deferral (to be paid later) and the refunds are being reduced. This appears to be a screw up on the IRS's part, not our software or how the provision is written. I tried researching if this rule has expired but can't find anything. I asked ACS and PPS at the IRS and they haven't heard of this happening --- and, as far as they're concerned, it's still the taxpayer's option for SE. I'm sure there will be more to come.

Just-Lisa-Now-

Intuit Community Champion

If you have a refund (youve already paid in the taxes) then you cant defer.

Ideally the software should have caught this or at least gave some kind of diagnostic (or maybe it did and nobody read it?)...I haven't had anyone interested in deferring.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

rbynaker

Level 13

Ironically, this wasn't one of the things that the IRS had to cobble together in the middle of tax season. These provisions have been around for a year now, they could have come up with a better reporting system.

That said, nothing has changed since I posted in this thread on 3/3/21. You can't increase a refund with a deferral. You never could.

I'm with Lisa, I haven't had anyone do this either (I'm considering doing it for myself just 'cause I'm curious how the IRS is going to handle it). Anyone with a deferral amount that is less than their total refund shouldn't have bothered trying to defer.

There are conceptually some borderline cases where the only correct solution is to have the IRS hold the refund. Say I have a balance due of $1,500 which includes $2,000 of deferrable SE tax. I do the SE deferral paperwork and now my return shows a $500 refund. Somewhere in the IRS system will be data that show I owe $1,000 on 12/31/21 and $1,000 on 12/31/22. And then it will also show that my $500 refund was held and applied to the 12/31/21 balance due. This is the only way to get the full $1,000 deferred to 12/31/22.

What a mess.

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