Self Employment Tax Deferral on 2020 Return in TurboTax

[D L]

Hi. If the 2020 tax return had a self employment tax deferral amount to be paid later. After it is paid, should an entry be made into TurboTax 2021 as an estimated tax entry for the amount paid to avoid having TurboTax pull in the 2020 tax file with the deferred amount which is shown as unpaid?

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[Bob Sandler]

>Hi. If the 2020 tax return had a self employment tax
>deferral amount to be paid later. After it is paid, should
>an entry be made into TurboTax 2021 as an estimated tax
>entry for the amount paid to avoid having TurboTax pull in
>the 2020 tax file with the deferred amount which is shown
>as unpaid?

It's too soon to know what TurboTax 2021 will do with the
deferred self-employment tax. For that matter, we don't yet
know whether the IRS forms for 2021 will have any place to
carry over or reconcile the deferred self-employment tax. I
would assume that they will handle it appropriately, and not
treat it as tax due on the 2021 tax return. It might not
appear on the 2021 tax return at all.

I certainly would not enter the payment as an estimated tax
payment for 2021, because that's not what it is. Entering it
as an estimated tax payment would make the tax calculation
on the 2021 tax return incorrect, resulting in an IRS notice
with an additional payment due, plus penalties and interest.
Wait for guidance when the 2021 forms and software are
available.

Bob Sandler

[D L]

On Monday, August 2, 2021 at 9:13:33 AM UTC-7, Bob Sandler wrote:
> >Hi. If the 2020 tax return had a self employment tax
> >deferral amount to be paid later. After it is paid, should
> >an entry be made into TurboTax 2021 as an estimated tax
> >entry for the amount paid to avoid having TurboTax pull in
> >the 2020 tax file with the deferred amount which is shown
> >as unpaid?
> It's too soon to know what TurboTax 2021 will do with the
> deferred self-employment tax. For that matter, we don't yet
> know whether the IRS forms for 2021 will have any place to
> carry over or reconcile the deferred self-employment tax. I
> would assume that they will handle it appropriately, and not
> treat it as tax due on the 2021 tax return. It might not
> appear on the 2021 tax return at all.
>
> I certainly would not enter the payment as an estimated tax
> payment for 2021, because that's not what it is. Entering it
> as an estimated tax payment would make the tax calculation
> on the 2021 tax return incorrect, resulting in an IRS notice
> with an additional payment due, plus penalties and interest.
> Wait for guidance when the 2021 forms and software are
> available.
>
> Bob Sandler

Thanks Bob.

[Bob Sandler]

>> It's too soon to know what TurboTax 2021 will do with the
>> deferred self-employment tax. For that matter, we don't yet
>> know whether the IRS forms for 2021 will have any place to
>> carry over or reconcile the deferred self-employment tax. I
>> would assume that they will handle it appropriately, and not
>> treat it as tax due on the 2021 tax return. It might not
>> appear on the 2021 tax return at all.

It turns out that the IRS has recently posted DRAFTS of Form
1040, Schedules 1, 2, 3, and Schedule SE for 2021. I don't
see anything about the deferred self-employment tax on any
of those draft forms. Of course these are just drafts, but
it seems likely that the deferred tax is not going to be
shown anywhere on the 2021 tax return. That makes sense,
since the payment is due by December 31, 2021, and you
wouldn't be filing your 2021 tax return until after that. So
it looks like payment of the deferred tax will be handled
outside of the tax return.

Bob Sandler

[Alan]

On 8/2/21 4:45 PM, Bob Sandler wrote:
>>> It's too soon to know what TurboTax 2021 will do with the
>>> deferred self-employment tax. For that matter, we don't yet
>>> know whether the IRS forms for 2021 will have any place to
>>> carry over or reconcile the deferred self-employment tax. I
>>> would assume that they will handle it appropriately, and not
>>> treat it as tax due on the 2021 tax return. It might not
>>> appear on the 2021 tax return at all.
>
> It turns out that the IRS has recently posted DRAFTS of Form
> 1040, Schedules 1, 2, 3, and Schedule SE for 2021. I don't
> see anything about the deferred self-employment tax on any
> of those draft forms. Of course these are just drafts, but
> it seems likely that the deferred tax is not going to be
> shown anywhere on the 2021 tax return. That makes sense,
> since the payment is due by December 31, 2021, and you
> wouldn't be filing your 2021 tax return until after that. So
> it looks like payment of the deferred tax will be handled
> outside of the tax return.
>
> Bob Sandler
>

You won't find it on the 1040 because the employer is responsible for
withholding the amount from the employee's 2021 wages and remitting it
to the IRS. The employer is also responsible for remitting the deferred
taxes for employees who are no longer employed.

See
https://www.irs.gov/newsroom/what-employers-need-to-know-about-repayment-of-deferred-payroll-taxes

[Bob Sandler]

>You won't find it on the 1040 because the employer is responsible for
>withholding the amount from the employee's 2021 wages and remitting it
>to the IRS. The employer is also responsible for remitting the deferred
>taxes for employees who are no longer employed.

We're talking about someone who is self-employed, not an
employee. The question is about a self-employed person who,
on his 2020 tax return, deferred the Social Security portion
of the self-employment tax. The deferred amount is on
Schedule 3 line 12e of his 2020 tax return. The
self-employed person is responsible for paying the deferred
tax himself. There is no employer involved, no wages, and no
withholding.

Bob Sandler

["\"Re...@home.com]

And here is the equivalent IRS Newsroom article explaining how a
SELF-employed person pays the deferred tax.

https://www.irs.gov/newsroom/how-self-employed-individuals-and-household-employers-repay-deferred-social-security-tax

Basically these steps:

"Individuals can pay the deferred amount any time on or before the due
date. They:

1. Can make payments through the Electronic Federal Tax Payment
System or by credit or debit card, money order or with a check.
2. Should be separate payments from other tax payments to ensure
they are applied to the deferred tax balance on the tax year 2020 Form
1040 since IRS systems won't recognize the payment for deferred tax if
it is with other tax payments or paid with the current Form 1040.
3. Should designate the payment as "deferred Social Security tax."

[D L]

Thanks a lot Alan.

[Maria Ku]

If a TP wants to send their payment by check, do we know WHERE to send this payment to? The IRS says to NOT send it to where we send our 1040-ES.

[Maria Ku]

News!

The IRS PMTA Argues That Taxpayers Who Make Minor Errors in Depositing Deferred FICA Under CARES Act Timely Owe Penalty on Entire Amount Deferred:
https://www.currentfederaltaxdevelopments.com/blog/2021/8/24/pmta-argues-that-taxpayers-who-make-minor-errors-in-depositing-deferred-fica-under-cares-act-timely-owe-penalty-on-entire-amount-deferred