Smartcheck flags an error in "Deferral for Certain Schedule H or SE Filers Smart Worksheet

[robinsondma]

Under this section line 11's value of "0" is flagged with the message "1040/1040SR Wks: Line 11 is too large.  This is probably because line 10 is a negative number.   I am due a refund so I don't think  Turbotax should have filled out this section.

[KathrynG3]

This could be coming from Schedule K-1(Form 1065), Box 14, Code A interacting with any other self-employment income, such as reported from Form 1099-NEC.

The question may be there because of initially qualifying to defer a portion of your self-employment tax, before all the details were entered into the return. Once a refund was established, the deferral was no longer an option.

If you return to the section directly, you may not see the screens necessary to adjust this since you no longer qualify for the option. 

The easiest and fastest solution is to enter nothing--leave the response blank.

If you cannot leave the response blank, then first make sure the program is up to date by following these steps:

Step 1:

• TurboTax Online: Close out of the program completely and close the browser. Re-open using an incognito Chrome browser on a PC, not a Chromebook or iPad.
• TurboTax CD/Download: Check for updates--depending on your version, this is found either under the menu item Online or Help.

Step 2:

1. Delete the Sch SE that applies--(Sch SE-T is for Taxpayer, Sch SE-S for Spouse)--by following these steps:
   1. From the left menu, select Tax Tools.
   2. Select Tools.
   3. Scroll to Delete a Form.
   4. Scroll to Sch SE-T and/or Sch SE-S and select Delete.
2. Decide if you want to fully delete your Schedule K-1, or simply review your input carefully. If you choose to delete and re-add, delete it from the Tax Tools area, as described above.
3. Return to the self-employment income & expenses interview in the Income & Expenses section and select Edit/Add.
   1. Select Edit for your business.
   2. Scroll down to Done so that the Sch SE is recalculated. 
   3. Finish any other questions in the self-employment interview and click Continue.
4. Review the return again.
   
    

If this box cannot be left blank after updates and after deleting Sch SE, and you are still experiencing unexpected results, then there is one more process to try: temporarily trigger a balance due by adding income long enough to decline the SE tax deferral option, then remove the extra income.

To do this in TurboTax, 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 income to reflect the income from March 27-December 31, 2021. 
      • This amount should be calculated and entered without the false added income, and will post to Line 18 of Sch SE
   1. ​​​​​​​Select Continue.
   1. At Tell us how much you'd like to defer, 
      • 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.

[robinsondma]

I found a much easier way to resolve the problem which I regard as a bug in the software (see below).  I simply removed the K-1 form as if it had never been there.  Then I ran a Smartcheck to be sure everything was fine.  Then I re-entered the information and followed prompts NOT requesting a deferral of self employment.  Smartcheck worked fine and did not flag anything.

The bug in the software is that if you enter the K-1 form info as one of the first forms in the system before  Turbotax has determined your final  tax liability,  there is a problem if you ultimately are due a refund. The software informs you that because you are due a refund, you are not entitled to defer SE.    It then says fixing the forms accordingly.  Unfortunately it  leaves a "0" in line 11 under "Deferred for Certain Schedule H or SE Filers Smart Worksheet rather than leaving it blank since line 10 is a negative number.  The error reported is that line 11 (which is "0")  "is too large".  It is possible that during the course of entering data you may have owed taxes and at that time Turbotax calculated  what portion of SE that could be deferred.