Part III of the 2020 Schedule SE is titled "Maximum Deferral of Self-Employment Tax Payments." The IRS instructions, as well as every news article I can find on the subject, make this sound optional ("you CAN defer," "you MAY defer," "you have the OPTION to defer"), but nowhere do I see guidance on the process for opting out of the deferral. I have already paid my full 2020 estimated taxes, just as I do each year. I have no interest in participating in this deferral, as I'll receive no real benefit in doing so. But how do I opt out? Do I simply leave all of the fields in Part III blank, and leave line 12e on Schedule 3 blank? Or do I have to complete all of these fields and opt out some other way? Thank you!
Generally speaking, you opt out by not having on Schedule 3 line 12e an amount that is greater than $0.
Note that if you pay enough in tax withholding and estimated taxes to cover your tax liability including the optionally deferrable SE tax, you cannot get it refunded so as to be able to defer it.
TurboTax calculates the amount that you are eligible to defer and then asks how much of that to defer. TurboTax places on Schedule 3 line 12e the amount that you specify.
I bet if you put zero on lines 18, 20, and 22, the maximum deferral will calculate as zero 🙂
see if that works........
ps I read the instructions and it does state it is optional, but doesn't state how to decline the option!!
https://www.irs.gov/pub/irs-dft/i1040sse--dft.pdf
page SE-6 on the right.
Here's what happened when a ran trial Self Employment return (download Deluxe): I enter my business income as normal and TurboTax (TT) completes the first part of Schedule SE. When I get to the review section (near the end) of the interview I get asked if I want to defer SE tax. Just say no (actually click "skip").
Generally speaking, you opt out by not having on Schedule 3 line 12e an amount that is greater than $0.
Note that if you pay enough in tax withholding and estimated taxes to cover your tax liability including the optionally deferrable SE tax, you cannot get it refunded so as to be able to defer it.
TurboTax calculates the amount that you are eligible to defer and then asks how much of that to defer. TurboTax places on Schedule 3 line 12e the amount that you specify.
from my understanding, if you take advantage of the deferral, it becomes very 'kludgy' how you actually pay these amounts by 12/31/21 and 12/31/22. It's can't be on year's tax return year (note it has to be paid by 12/31 and not by 4/15) so it appears it has to be paid directly to the IRS?????
The SE tax deferral is a credit on the 2020 tax return, so presumably the repayment would have to be reported as an additional tax on Schedule 2 of the 2021 and 2022 tax returns. This will likely require TurboTax to carry forward the amount of the credit yet to be repaid (or to at least ask for that information to be supplied by the user). Still, that doesn't explain how the 12/31 repayment deadlines would be enforced.
That's the main reason I want to opt out. The whole thing seems like a mess just waiting to happen. Frankly, I find it to be a worthless gesture. If the government wanted to be helpful, they could have simply forgiven a portion of the tax, rather than just punting it down the road.