Form 1040 (SP) Schedule 3: Additional Credits and Payments (2020) — A Taxpayer's Guide
What the Form Is For
Schedule 3 (Anexo 3) is an attachment to your main Form 1040 (SP) that helps you claim tax credits and report additional payments that don't fit on the basic form. Think of it as an overflow form where you document two important categories: credits that reduce your tax bill and extra payments you've already made toward your taxes.
The schedule has two parts. Part I covers ""nonrefundable credits""—these can reduce your tax to zero but won't generate a refund beyond that. Part II handles ""other payments and refundable credits""—these can result in money back even if you owe no tax. Common items include the premium tax credit for health insurance purchased through the marketplace, payments made when requesting a filing extension, excess Social Security tax withheld from multiple jobs, and credits related to foreign taxes, education expenses, retirement savings contributions, and energy-efficient home improvements.
You'll use Schedule 3 whenever your tax situation involves credits beyond the basic child tax credit, or when you have additional payments to report like extension payments or overpaid Social Security withholdings. The totals from this schedule flow directly to specific lines on your main Form 1040, reducing what you owe or increasing your refund.
When You'd Use Form 1040 (SP) Schedule 3
You must attach Schedule 3 to your original 2020 Form 1040 (SP) if any of the situations described above apply to you. The normal deadline was April 15, 2021, though the IRS extended it to May 17, 2021 for tax year 2020.
If you discover after filing that you forgot to claim a credit or report a payment on Schedule 3, you'll need to file an amended return using Form 1040-X. Common reasons for amending include receiving a late-arriving Form W-2c showing corrected Social Security withholding, discovering you're eligible for education credits you didn't claim, or needing to reconcile marketplace health insurance premium tax credits after receiving Form 1095-A.
You have three years from your original filing date or two years from when you paid the tax (whichever is later) to file an amended return and claim a refund. After this window closes, you lose the right to those credits permanently. If you need to add Schedule 3 to a return that didn't originally include it, submit Form 1040-X with the completed Schedule 3 attached, explaining what changed. The IRS provides a ""Where's My Amended Return?"" tool online to track your amended return's processing status, which typically takes up to three weeks to appear in their system.
Key Rules or Details for 2020
Nonrefundable vs. Refundable
Nonrefundable vs. Refundable: The most important distinction is understanding which credits can only reduce your tax to zero (nonrefundable) versus which can generate a refund even if you owe nothing (refundable). Foreign tax credits, dependent care credits, education credits, and energy credits are nonrefundable. The premium tax credit and excess Social Security withholding are refundable.
Required Documentation
Required Documentation: Each credit requires specific supporting forms. You cannot claim the foreign tax credit without Form 1116 (in most cases), dependent care credit without Form 2441, education credits without Form 8863, or premium tax credit without Form 8962. Missing these attachments will delay processing or result in denial of the credit.
Premium Tax Credit Reconciliation
Premium Tax Credit Reconciliation: If you purchased health insurance through the marketplace and advance payments were made on your behalf to reduce monthly premiums, you must reconcile these payments using Form 8962 and report the result on Schedule 3, line 8. This is mandatory—you cannot skip this step even if you don't want the credit, because the IRS needs to verify the advance payments were correct.
Multiple Employer Social Security
Multiple Employer Social Security: If you worked for more than one employer in 2020 and total Social Security tax withheld exceeded $8,537.40, you can claim the excess on line 10. However, if a single employer withheld too much, that employer must refund you directly—you cannot claim it here.
COVID-19 Special Provisions
COVID-19 Special Provisions: For 2020, special pandemic-relief provisions allowed self-employed individuals to claim credits for qualified sick leave and family leave wages (line 12b), and certain taxpayers could defer Social Security tax payments (line 12e). These require careful calculation using specific worksheets.
Step-by-Step (High Level)
Start with Part I
Start with Part I: Review whether you qualify for any nonrefundable credits. Check if you paid foreign taxes, had child or dependent care expenses while working, paid for college education, contributed to retirement accounts, or made qualifying energy-efficient home improvements. For each applicable credit, complete the required form first (Form 1116, 2441, 8863, 8880, or 5695), then transfer the credit amount to the corresponding Schedule 3 line. Add lines 1 through 6 and enter the total on line 7, which transfers to Form 1040, line 20.
Move to Part II
Move to Part II: Gather documentation for any additional payments. If you bought marketplace health insurance, complete Form 8962 using your Form 1095-A to reconcile advance premium payments, then enter the net credit on line 8. Enter any extension payment from Form 4868 on line 9. Calculate excess Social Security withholding by totaling amounts from all your W-2 forms—if it exceeds $8,537.40, enter the excess on line 10. If you claimed fuel tax credits, attach Form 4136 and enter the amount on line 11.
Handle Special Situations
Handle Special Situations: Line 12 captures several specialized credits and payments. Use the sub-lines (12a through 12e) for items like qualified sick and family leave credits for the self-employed (Form 7202), repayments under special tax rules, or deferred Social Security taxes. Follow the worksheet instructions carefully for line 12e if you're deferring payroll taxes as permitted under CARES Act provisions.
Total and Transfer
Total and Transfer: Add lines 8 through 12f and enter the total on line 13. This amount transfers to Form 1040, line 31, increasing your refund or reducing your balance due. Double-check all calculations and ensure every supporting form is attached in the correct order based on the attachment sequence numbers printed on each form.
Common Mistakes and How to Avoid Them
Missing Required Forms
Missing Required Forms: The number one error is claiming credits without attaching mandatory supporting forms. Before mailing or e-filing, verify that Form 1116 accompanies any foreign tax credit, Form 8962 accompanies any premium tax credit, and Form 2441 or 8863 accompanies dependent care or education credits. E-filing software typically prevents this mistake, but paper filers must check manually.
Incorrect Math
Incorrect Math: Adding errors frequently occur on lines 7 and 13. Use a calculator and double-check your arithmetic. Also verify you're transferring the correct amounts from supporting forms—copying errors are common. Electronic filing eliminates most calculation mistakes.
Wrong Part for Credits
Wrong Part for Credits: Don't confuse Schedule 3 credits with those claimed elsewhere. The child tax credit and credit for other dependents belong on Form 1040, not Schedule 3. Only ""additional"" credits go here. Read instructions carefully to determine where each credit belongs.
Forgetting Marketplace Reconciliation
Forgetting Marketplace Reconciliation: If advance premium payments were made for your health insurance, you must file Form 8962 and Schedule 3 even if you wouldn't otherwise need them. Skipping this step triggers IRS notices and delays. Always complete the reconciliation if you received Form 1095-A.
Social Security Withholding Errors
Social Security Withholding Errors: When claiming excess withholding, count only amounts from multiple employers, not a single employer who withheld too much. Also ensure you're using the current year's withholding limits ($137,700 wage base for 2020, with maximum withholding of $8,537.40). Include corrected W-2c information if received after initial filing.
Extension Payment Confusion
Extension Payment Confusion: If you paid estimated taxes or made payments with an extension request, these go on different lines. Extension payments go on Schedule 3, line 9. Regular estimated tax payments go on Form 1040, line 26. Don't confuse them or report the same payment twice.
Incomplete Foreign Tax Credit Documentation
Incomplete Foreign Tax Credit Documentation: If your foreign taxes exceed $300 ($600 if married filing jointly) or don't meet the simplified exception criteria, you must file Form 1116—no shortcuts allowed. Attempting to claim the credit without proper documentation results in denial.
What Happens After You File
Once you submit your return with Schedule 3 attached, the IRS processes your claimed credits and payments within their normal timeframe. For most electronically filed returns, processing completes within 21 days, though paper returns take longer—typically six to eight weeks.
If you claimed the premium tax credit or certain refundable credits, the IRS may take additional time to verify information against marketplace databases or employer records. They'll cross-reference your Form 8962 against Form 1095-A data reported by the marketplace. Discrepancies trigger automated notices requesting clarification.
The IRS will notify you by mail if they find errors, missing documentation, or need additional information. Common issues include missing Forms 1116, 8962, or 2441, or mathematical errors on Schedule 3. When this happens, respond promptly with requested information to avoid delays. Some errors can be corrected by IRS staff without requiring an amended return from you, though they'll adjust your refund or balance due accordingly.
Your refund (if any) will be issued according to your chosen method—direct deposit typically arrives within 21 days of acceptance, while paper checks take longer. If you deferred Social Security taxes using line 12e, remember that those deferred amounts must be repaid in two installments: 50% by December 31, 2021, and the remaining 50% by December 31, 2022. The IRS will track these and send notices if payments aren't made on schedule.
You can check your refund status using the ""Where's My Refund?"" tool on IRS.gov or the IRS2Go mobile app. Enter your Social Security number, filing status, and exact refund amount. The system updates overnight, so check no more than once daily. If you filed an amended return, use the separate ""Where's My Amended Return?"" tool, which shows processing status once your amended return appears in their system (typically three weeks after mailing).
FAQs
Do I need Schedule 3 if I only have the child tax credit?
No. The child tax credit and credit for other dependents are claimed directly on Form 1040, lines 19 and 28. Schedule 3 is only for additional credits like foreign tax, education, dependent care, retirement savings, energy, and premium tax credits. If those don't apply to you, skip Schedule 3 entirely.
I had health insurance through my employer, not the marketplace. Do I need to file Schedule 3 for health-related credits?
Generally no, unless you switched from marketplace coverage to employer coverage mid-year and received advance premium payments, or you're claiming the health coverage tax credit. Employer-sponsored insurance doesn't involve the premium tax credit or Schedule 3 unless you also had marketplace coverage during 2020.
What's the difference between estimated tax payments and extension payments for Schedule 3 purposes?
Estimated tax payments (quarterly payments made throughout the year) are reported on Form 1040, line 26, not Schedule 3. Extension payments (amounts sent specifically with Form 4868 when requesting more time to file) go on Schedule 3, line 9. They're legally different payment types, though both reduce what you owe.
I worked three part-time jobs and all my W-2s show Social Security withholding. How do I know if I can claim excess withholding?
Add up the Social Security tax from all W-2s (box 4). If the total exceeds $8,537.40, you can claim the excess on Schedule 3, line 10. This happens because each employer withholds as if they're your only employer, not knowing your combined wages exceed the $137,700 annual limit. The excess is automatically refundable.
My tax software didn't generate Schedule 3 but I paid foreign taxes. Did something go wrong?
Possibly. If your foreign taxes were $300 or less ($600 if married filing jointly) and met all simplified exception criteria, you may be able to claim the credit directly on Form 1040, line 20 without Schedule 3 or Form 1116. However, most situations require Schedule 3 and Form 1116. Double-check your software entries—you may need to manually indicate you have foreign tax to claim.
Can I claim energy credits for solar panels installed in late 2020 if I file my original return without them and then amend?
Yes, provided you file Form 1040-X within three years of your original filing deadline or two years from when you paid the tax, whichever is later. You'll attach Schedule 3 and Form 5695 to your amended return. Don't delay—the three-year window is firm, and late amendments lose eligibility. Submit supporting documentation showing installation dates and costs.
What happens if I received Form 1095-A after filing without reconciling the premium tax credit?
File an amended return immediately using Form 1040-X. Include completed Form 8962 and Schedule 3 showing the reconciliation. The IRS will eventually notice the discrepancy when matching marketplace records and will send a notice requiring the reconciliation anyway. Filing the amendment proactively avoids potential penalties and resolves the issue faster.
Source: IRS Form 1040 Schedule 3 (2020), Instructions for Form 1040 and Schedules (2020), Spanish Instructions (2020)
