Schedule SE

[Noah1975]

On schedule SE (form 1040) part III, line 18. I’m not sure what to put here. I put 0, but it seems to be asking how much money the business made from 3/20-12/20.  What is the purpose of this? Should I estimate it or give a firm number? And how to I change this from 0 within TurboTax (can’t seem to figure out how to change). 

[JohnW152]

This is part of new legislation that allows self-employed taxpayers to pay only 50% of Social Security tax on net earnings from self-employment for the period March 27, 2020 through December 31, 2020 this year, and the other 50% next year.   

As far as what to enter on Line 18, you’ll have to make your own calculation, but the IRS gives you a lot of leeway in figuring the amount.  I include an example below.

On Line 18, you're asked to make a calculation of the portion of the net profit or loss that you reported on Line 3 of Schedule SE that was made between March 27, 2020 and December 31, 2020.

The instructions for Line 18 in the IRS's 2020 Instructions for Schedule SE are vague, but they allow you to use any reasonable method to determine this figure:

Use any reasonable method to divide the net profit or (loss) you reported on line 3 between (a) January 1, 2020, through March 26, 2020, and (b) March 27, 2020, through December 31, 2020. A reasonable method will accurately reflect the time when income was earned or accrued and deductible expenses were paid or incurred, depending on your method of accounting. In most cases, a proportional division of the amount reported on line 3 based upon the number of days in each period will be considered reasonable.

EXAMPLE:  Say your Schedule SE Line 3 amount was $12,000.  March 27 to December 31 is 280 days.  280 days divided by 366 days (2020 was a leap year) is 0.765.  $12,000 multiplied by 0.765 equals $9,180. 

To get to it in TurboTax, visit the Schedule SE section by:

1. Opening (continuing) your return if it isn’t already open.
2. Inside TurboTax, search for sch SE and then select the Jump to sch se in the search results.
3. On the Self-Employment Tax screen, select Make Adjustments.

[klcg1]

What if you don't want to defer? Put zero obviously, but before I knew what it was for I calculated an amount and entered it. Now I don't know how to take it out and put zero. Turbo Tax won't let me edit the actual Sch SE that I have found.  I'm thinking of wiping it clear and starting over, ugh.

[gloriah5200]

TurboTax asks you the amount of income earned during the "qualified" covid period of March 27 -December 31.

Then, it asks you in a separate question the amount of se tax you want to defer.  If you don't want to defer any, enter $0.  If you do want to defer some, enter the amount.  Just don't leave it blank because then the software assumes the full amount is to be deferred.

To delete or edit the election to defer your self-employment taxes, do the following in TurboTax:

1. Open your return
2. If you open to the "Hi, let's keep working on your taxes!" screen, click Pick up where you left off.
3. Click Federal in the left pane
4. Click Deductions and Credits in the banner at the top
5. On the Your Tax Breaks page, scroll down until you come to Tax relief related to Covid-19
6. Click Revisit next to Self-employment tax deferral
7. When you're asked Do you want more time to pay self-employment taxes?, answer No

 Self-employed taxpayers are allowed to pay 50% of Social Security tax on net earnings from self-employment for the period March 27, 2020 through December 31, 2020.

For additional information refer to:

Deferral of se tax due to covid

[klcg1]

I found where to make not deferral, but it won't change after I hit continue.  That's why I'm thinking of wiping it clear. Ugh again

[KathrynG3]

It is possible that it is not updating. This can be corrected without clearing and starting over.

You can recalculate the deferral by temporarily recalculating this section by adding more income. Otherwise, without any adjustments, you may not get back to the same screens. 

To return to the interview section to adjust these entries and un-trigger any deferral that you no longer want, follow these steps:

Enter a temporary amount as income in the self-employment section that will result in you not having a refund.

1. From the left menu, select Federal.
2. From the Income & Expenses, scroll to Self-employment income & expenses and Edit/Add.
3. At Your 2020 work summary, select Edit.
4. Under INCOME, select Add income for this work.
5. Add Other self-employed income, includes 1099-K, cash, and checks and Continue.
6. At Type of income, enter Temp income to remove deferral and enter a large amount, such as $100,000 and Continue.

Decline to defer any self-employment tax.

1. From the left menu, click on Federal.
2. Click the second tab from the left, Deductions & Credits.
3. Scroll down to Tax Relief related to Covid-19 and Revisit.
4. Select Self-employment tax deferral and select Revisit.
5. Answer Yes at the next screen to get back to Let's start by getting your eligible income.
   1. Enter 280/366ths of your actual income to reflect the income from March 27-December 31, 2021. 
      1. This amount should be the same as the correct amount on Line 18 of Sch SE.
6. Select Continue.
7. At Tell us how much you'd like to defer, 
   1. Enter 0.

​​​​​​​Remove the temporary income.

1. From the left menu, select Federal.
2. From the Income & Expenses, scroll to Self-employment income & expenses and Edit/Add.
3. At Your 2020 work summary, select Edit.
4. Under INCOME, select the Trash can icon next to Temp income to remove deferral and Continue.

For more details, see TurboTax Expert @DawnC's answer here, about 2/3 down the page: Resolve Sch SE-T Max Deferral Line 18 must be entered.

@klcg1

@Noah1975

[arjibald]

What if you're running at a loss? We have a business that has an negative number in line 3 of Schedule SE. No matter what I enter in line 18, I get an error. It can't be a number less than 0, but when I enter 0 or anything greater than 0, it says the number is too large. I can't get around the error and still e-file. We're not eligible for the deferral, but I can't get rid of the Sch SE for the business running at a loss, even by adding temporary income and electing not to defer.

[CurtT]

If my business showed a loss in 2020 what do you enter in Schedule SE on line 18?

[ErnieS0]

Leave line 18 blank if you have a net loss from self-employment. TurboTax should not be creating a Schedule SE. Only a Schedule SE Adjustments Worksheet.

• Click Tax Tools in the left column
• Click Tools
• Select Delete a Form in Tools Center
• Scroll down to Sch SE-T or -S. Delete.
• Click Continue With My Return in the lower right