Self-Employment Tax Deferral on 2020 tax return

[Ephesians3-14]

I have a new client that has $6,500 on Sched 3 - which is the S/E tax deferral allowed in 2020. It looks like I need to pick up 50% of that in 2021 and 50% in 2022. 

What line items does the recapture go on when preparing the 2021 tax return?

[abctax55 · Accepted solution]

Just a few discussions on this:

https://proconnect.intuit.com/community/forums/searchpage/tab/message?advanced=false&allow_punctuati...

AND... the first installment had to paid by 12/31/21 either using the voucher that came with the letter notifying the client of the obligation, or at irs.gov, or via EFTPS. 

If that first installment wasn't paid by 12/31/21 - the entire deferral became due, with penalties & interest all the way back to 5.15.21 (I think that was the original due date for 2020 returns, right 🙂

The deferral is NOT paid via any addition to the 2021 tax return.

[abctax55]

And do NOT let the client blame YOU for anything on this.  

Every client of mine that opted for this DID get the letters.  

AND, the prior preparer should have explained the in's/out's to your 'new' client.

[jeffmcpa2010]

I knew there was a reason I didn't even give any of my clients the option to consider that deferral.

[abctax55]

(with hindsight... I wish I hadn't informed them of the option.  P I T A !!)

[qbteachmt]

"The IRS made clear that any late payment of either installment will subject the entire deferral to a late payment penalty. 

• Example: An employer defers $50,000 and deposits $25,000 on December 31, 2021, but fails to make the second deposit by December 31, 2022. The employer is liable for a Section 6656 penalty on the entire $50,000.
• Since the penalty under Section 6656 for failure to timely deposit payroll taxes paid more than 15 days after the due date is 10% of the amount owed, this would result in a 10% penalty of the entire deferral, even though the first installment was timely."

I found a nice article that covers the repayment oversight:

https://www.yeoandyeo.com/resource/guidance-for-repayment-of-deferred-payroll-self-employment-taxes

And remind your client this was Not Income Tax deferral, so it isn't part of the 1040 for the upcoming years. It was reported, and the Payment was deferred.

People get this confused with the covid retirement distribution, where Reporting was deferred.