Deferred Social Security Taxes

[rgrthumb]

I don't get it. I've been receiving the same W-2 for the last 10 years (with no FICA taken in any of those years), and this is the first time I'm told a W-2C will be coming. What makes this year different?

[Critter-3]

Ask the issuer what tax rules changed and why they are sending the corrected statement. 

[rgrthumb]

I didn't receive a notification from the issuer of my W-2. The TurboTax app indicated I should expect one. I've used TurboTax since before I retired 10 years ago and this is a first. My circumstances have not changed and my W-2 has not changed over the last 10 years. No FICA taxes taken in any year and I have never received a W-2C. I'm still puzzled.

[spichon]

Hi,

In 2020 I took the self-employment social security deferral. On 12/31/2021 I paid the first installment owed thru the IRS site EFTPS.  How and where do I enter this payment in Turbotax for my 2021 return?

Thanks,

SE

[Critter-3]

That is not entered anywhere on the 2021 return at all. 

You make the second payment at the end of this year as the IRS instructions dictate: 

https://www.irs.gov/newsroom/irs-reminder-for-many-employers-and-self-employed-people-deferred-socia....

[FangxiaL]

The payment you paid was for tax year 2020 (tax you still owe in 2021), it should not go on your 2021 taxes. So you do not enter it anywhere on your 2021 tax return. It is not considered as an estimated tax payment for your 2021 tax liability.

@spichon

[brctt1]

I have the same issue as @rgrthumb - the W2 from my former employer is for imputed income for COGLI (cost of group life insurance over 50k).  The W2 includes social security and medicare wages in boxes 3 and 5, but no tax withheld in boxes 4 or 6.  As I am retired, the employer has no wages to withhold taxes from - the W2 is just reporting the taxable cost of group life insurance.

This new behavior of TurboTax is due to the tax payment deferral per Notice 2020-65 (see links in earlier posts about this).   Turbo tax is assuming that any W2 with nothing in boxes 4 or 6 is due to deferred social security payments per Notice 2020-65.   But that is not our situation.

If we are required to pay the social security and medicare tax on this imputed income with our 1040, turbo tax should provide a way to do it.  If not required, or not done via 1040, TT should provide correct guidance.

[DianeW777]

Let's figure this out.  Your W-2 should include the following letters in Box 12. If they are not there then you should add them yourself. The dollar amount should equal 6.2% and 1.45% respectively times the amount in Boxes 3 and 5.

• M — Uncollected Social Security or RRTA tax on taxable cost of group-term life insurance over $50,000 (former employees only). Include this tax on Form 1040 Schedule 2, line 8, identify as “UT”.
• N — Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (former employees only). Include this tax on Form 1040 Schedule 2, line 8, identify as “UT”.

In my test I created your scenario and entered the information, as I described above, on the W-2. I also added $1 in Box 1, in the hopes that it will e-file for you. See the images below for assistance and you can Preview My 1040 after your entry.

For TurboTax Online use the steps below.

1. Open or continue your return.
2. With the Tax Tools menu open, you can then:
   • View only your 1040 form: Select Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu. (Scroll to Schedule 2)

[brctt1]

Thanks @DianeW777  indeed my W2 has box 12 codes C, M, and N. (C for COGLI, M for uncollected SS tax, and N for Uncollected Medicare tax.   The numbers agree with 6.2% and 1.45% of the COGLI amount.

In my W2/W2G Summary form in Turbotax, lines h and i have the correct amounts corresponding to the W2 box 12 codes N and M respectively.

I had not changed anything before checking the W2 & W2G Summary form - so my W2 was imported/entered  correctly and the numbers match; our 1040 should be correct.

The pop-up dialog about Notice 2020-65, and expecting a W2-C doesn't apply to our situation, and it would be good to add some logic to detect this and avoid the pop-up for situations like ours.  Or perhaps add some words like "Note:  Retirees who receive a W2 from their former employer reporting COGLI with codes C, M, N in box 12 may see this pop-up and can ignore it if they have no deferred social security tax other than what is reported in box 12 with code M"

[brctt1]

Form 1040 Schedule 2 also shows the correct amount on line 13 "Uncollected social security and Medicare or RRTA tax..."

No changes were made since entering my W2 and all other info to complete my taxes, and seeing the pop-up about Notice 2020-65, deferred social security taxes.  So TT is handling our situation correctly - except for the unexpected pop-up that doesn't apply to this situation.

[spichon]

I have just received my 2021 refunds from the IRS and the State. Now I'm realizing that I must file an amendment for 2021.  While trying to e-filed my 2021 amended return using Turbotax CD the software isn't providing for e-filing the State (CA, 540X) only the federal (1040X).  On the 540X State filing instructions it says I should only mail the check and the voucher but not the state paper return since I e-filed. But I didn't. My questions are:
** Does e-filing and amended return include both federal and state?  At no charge, since it didn't ask for payment?
** Do I still need to mail my amended State return or was it included in the federal e-filing?

Thanks,

Spichon

[PattiF]

You cannot e-file an Amended California CA-540X in TurboTax. You will need to mail the Amended return along with the voucher and payment.

[spichon]

Bonus Depreciation

I have 2 rental houses and in one which I had to replace kitchen cabinets ($13,900) and carpet ($5,094) in 2023. I couldn't use Section 179 for 100% depreciation this year since I'm showing a loss, so I'm using the special bonus depreciation in TT which is 80% for 2023.  My total repairs/expenses for this house in 2023 on Schedule E are over $30,000 some of which will fall in the De Minimis category. It was my concern that since the total repair expense is over the $10000 (or 2% of the house) that I would be denied the bonus depreciation allowance for these 2 assets.  My questions:
** Is there a $10,000 total expense limitation on bonus depreciation allowance as in Section 179 or is it waived for the special depreciation allowance?
** I entered these 2 assets and selected 80% depreciation allowance and TT actually provided the full 80% depreciation for this year and posted it on Schedule E, contrary to everything I've read.  Am I OK taking 80% depreciation for 2023 as TT provided me with?

Thank you,

[DavidD66]

There is not, to the best of my knowledge, any limitation on bonus depreciation due to the amount (either a fixed dollar amount or a percentage) of repair expenses deducted in the same year.  Moreover, the fact that TurboTax is allowing you to take the full 80% deduction with no limitations or warnings reinforces my belief that you are entitled to the full deduction without limitation.  You are therefore OK taking the full 80% bonus depreciation. 

[spichon]

Thank you for your response.  So I’m clear about my next steps and before I move on to post my expenses I’d like your advice on the following:

1. Elected the De Minimis and the Special Depreciation allowance in TT for my rental property 2023 expenses
2. In 2023 I spent $2000 on new garage door, $5,094 on new carpet and $13,900 on new kitchen cabinets as well as other smaller assets/expenses totaling $30K
3. I entered these three as Added Assets and was expecting 100% deduction for the garage door (<$2500 DeMinimis) and 80% deduction for the carpet and  cabinets under the Special Depreciation allowance
4. Instead, TT ignored the De Minimis option, reduced the deduction to 80% on all three assets and posted it as depreciation in line 18 on Schedule E as well as in the Depreciation Report as Special Depreciation Allowance
5. Entering the garage door as expense in Line 19 on Schedule E (Other) and the carpet/cabinets as assets TT posted 100% deduction for the garage door and 80% for the carpet/cabinets as hoped Questions:

My questions are:

1. Are my two entries in 5 above correct? Specifically entering the door in line 19 on Schedule E?
2. If so, should I list the other sub $2,500 expenses (I have some 20 of them) in Other (line 19) item by item as they appear on the invoice or is there a way to consolidate?

Thank you,