Schedule 3 (Form 1040) Filing Checklist for Tax Year 2021
Overview and 2021-Specific Features
Schedule 3 reports nonrefundable credits in Part I and other payments, as well as refundable credits in Part II. The 2021 version features unique provisions reflecting the American Rescue Plan Act, including separate reporting lines for qualified sick and family leave credits based on leave timing, restored health coverage tax credit eligibility, and a new refundable child and dependent care credit.
The two-line structure for sick and family leave credits distinguishes leave taken before April 1, 2021, on line 13b from leave taken April 1 through September 30, 2021, on line 13h, reflecting ARPA extensions under IRC sections 3131 through 3133.
Key 2021 Programs
The American Rescue Plan Act extended refundable paid sick and family leave credits for employees and self-employed individuals for leave taken April 1 through September 30, 2021. Self-employed individuals use Form 7202 to calculate credits based on average daily self-employment income. The Recovery Rebate Credit for the third Economic Impact Payment reconciliation does not appear on Schedule 3 but is claimed directly on Form 1040, line 30.
Ten-Step Compliance Checklist
Step 1: Gather Nonrefundable Credit Documentation
Collect all forms supporting nonrefundable credits claimed in Part I. Gather Form 1116 for foreign tax credit if you paid income taxes to foreign countries. Obtain the Form 2441 line 11 amount for the nonrefundable child and dependent care expenses credit. Collect Form 8863, line 19, for education credits, including the American Opportunity Credit and the Lifetime Learning Credit.
Prepare Form 8880 for the retirement savings contributions credit if you made qualifying contributions to IRAs or employer retirement plans. Obtain Form 5695 for residential energy credits, including solar, wind, geothermal, and fuel cell property. Gather Form 3800 for general business credit aggregating multiple business credits. Collect Form 8801 for credit for prior year minimum tax if you paid alternative minimum tax in earlier years.
Prepare additional credit forms as applicable: Form 8839 for adoption credit, Schedule R for credit for elderly or disabled, Form 8910 or 8936 for qualified motor vehicle credits, Form 8396 for mortgage interest credit, Form 8859 for District of Columbia first-time homebuyer credit, Form 8834 for qualified electric vehicle credit, Form 8911 for alternative fuel vehicle refueling property credit, Form 8912 for credit to holders of tax credit bonds, and Form 8978 line 14 for IRC section 965 net tax liability.
Step 2: Verify Eligibility Requirements and Income Limits
Confirm eligibility for each credit before claiming. For education credits on Form 8863, verify you are a U.S. resident or U.S. citizen, or are filing jointly with a U.S. citizen or resident alien spouse. For foreign tax credit on Form 1116, exclude taxes paid to countries subject to IRC section 901(j) sanctions.
For the retirement savings contributions credit on Form 8880, verify your modified adjusted gross income does not exceed the threshold for your filing status. Refer to the Form 8880 instructions for the 2021 MAGI limits. For the child and dependent care credit on Form 2441, verify you meet the work-related expense requirements and the qualifying person tests.
Step 3: Prepare Refundable Credit Forms
Gather Form 8962 for the net premium tax credit if you or family members enrolled in health insurance through the Health Insurance Marketplace. File Form 8962 and reconcile any advance payments made on your behalf. Collect Form 4136 for credit for federal tax on fuels, including registration numbers and detailed fuel type and usage information.
Obtain Form 8885 for the tax credit related to health coverage, which was restored for 2021 but expires at the end of the year. Prepare Form 7202 for qualified sick and family leave credits if you are self-employed. Form 7202 separates calculations for leave taken before April 1, 2021, in lines 1 through 24, and for leave taken from April 1 through September 30, 2021, in lines 36 through 69.
Step 4: Calculate Sick and Family Leave Credits
For household employers who paid qualifying sick or family leave wages, complete Schedule H lines 8b through 8e for leave before April 1, 2021, and line 8f for leave April 1 through September 30, 2021. Report nonrefundable portions on Schedule H lines 8b or 8c and refundable portions on lines 8e and 8f. Transfer refundable amounts to Schedule 3 lines 13b and 13h, respectively.
For self-employed individuals, complete Form 7202 Parts I and II for leave taken before April 1, 2021, using the average daily self-employment income calculated as net earnings from self-employment divided by 260. Complete Parts III and IV for leave taken April 1 through September 30, 2021.
Maximum sick leave credit amounts are $5,110 for self-care or $2,000 for care of others per period. Maximum family leave credit amounts are $10,000 for the first period or $12,000 for the second period.
Step 5: Complete Refundable Child and Dependent Care Credit
If claiming a refundable child and dependent care credit under the 2021 ARPA expansion, check box B on Form 2441 to confirm that your principal place of abode was in the United States for more than half of 2021. Calculate the refundable portion on Form 2441 line 10, not line 11, which reports the nonrefundable portion.
For 2021, ARPA temporarily increased credit percentages and expanded income phase-out limits. Report the Form 2441 line 10 amount on Schedule 3 line 13g. Do not report the line 10 amount on line 13g if you already claimed the nonrefundable portion on Schedule 3 line 2.
Step 6: Complete Part I Nonrefundable Credits
Enter the Form 1116 foreign tax credit amount on line 1 if applicable. Enter Form 2441, line 11, nonrefundable child and dependent care credit on line 2. Enter Form 8863, line 19, education credit on line 3 for amounts not claimed as refundable on Form 1040, line 29. Enter Form 8880 retirement savings contributions credit on line 4. Enter Form 5695 residential energy credits on line 5.
Complete lines 6a through 6z for other nonrefundable credits. Enter Form 3800 for general business credit on line 6a. Enter Form 8801 for the prior year's minimum tax credit on line 6b. Enter Form 8839, adoption credit, on line 6c. Enter the Schedule R credit for the elderly or disabled on line 6d. Enter alternative motor vehicle credit on line 6e. Enter the qualified plug-in motor vehicle credit on line 6f.
Enter the Form 8396 mortgage interest credit on line 6g. Enter Form 8859 District of Columbia first-time homebuyer credit on line 6h. Enter the qualified electric vehicle credit on line 6i. Enter the Form 8911 alternative fuel vehicle refueling property credit on line 6j. Enter Form 8912 credit to holders of tax credit bonds on line 6k. Enter the Form 8978 line 14 amount on line 6l. Enter any other nonrefundable credits on line 6z with form identification.
Add lines 1 through 5 and line 7 and enter the total on line 8. Transfer line 8 in total to Form 1040, Form 1040-SR, or Form 1040-NR, line 20.
Step 7: Report Sick and Family Leave Credits by Period
From Schedule H line 8e or Form 7202 line 24, report refundable sick and family leave credits for leave taken January 1 through March 31, 2021, on Schedule 3 line 13b. From Schedule H line 8f or Form 7202 line 69, report refundable sick and family leave credits for leave taken April 1 through September 30, 2021, on Schedule 3 line 13h.
Do not combine or mix these two periods on a single line. The IRS requires separate reporting to track the two distinct legislative periods under the Families First Coronavirus Response Act and the American Rescue Plan Act.
Step 8: Complete Part II Other Payments and Refundable Credits
Enter the Form 8962 net premium tax credit on line 9. This reconciles advance payments of the premium tax credit made to your health insurer. Form 8962 is mandatory if you received advance payments of the premium tax credit. Enter any amount paid with the Form 4868 extension request on line 10.
Enter excess Social Security and tier 1 RRTA tax withheld on line 11 if you had two or more employers in 2021 and total wages exceeded the annual Social Security wage base. Calculate separately for each spouse if filing jointly. Enter Form 4136, Credit for Federal Tax on Fuels, on line 12.
Enter the Form 2439 amount on line 13a if you were a shareholder in a mutual fund or real estate investment trust. Enter line 13b sick and family leave credits for pre-April one leave. Enter the Form 8885 health coverage tax credit on line 13c. Enter the IRC section 1341 repayment credit on line 13d if you repaid amounts included in income in an earlier year. Enter the sum of the deferred amount of IRC section 965 net tax liability on line 13f. Enter Form 2441, line 10, refundable child and dependent care credit on line 13g.
Enter line 13h sick and family leave credits for leave after March 31. Enter other refundable credits on line 13z with identification. Add lines 9 through 12 and line 14, and enter the total on line 15. Transfer line 15, total, to Form 1040, Form 1040-SR, or Form 1040-NR, line 31.
Step 9: Verify Required Attachments
Attach all supporting forms to your return. Include Form 1116 for foreign tax credit claimed on line 1. Attach Form 2441 for child and dependent care credit claimed on line 2 or line 13g. Include Form 8863 for education credits on line 3. Attach Form 8880 for the retirement savings contributions credit, which should be reported on line 4. Include Form 5695 for residential energy credits on line 5.
Attach Form 8962 for the premium tax credit on line 9. This is mandatory if advance payments were received. Include Form 4136 for fuel tax credit on line 12. Attach Form 8885 for health coverage tax credit on line 13c. Include Form 7202 for self-employed sick and family leave credits on lines 13b and 13h. Attach Schedule H if claiming household employer, ill, and family leave credits. Do not mail Schedule 3 alone. It must accompany Form 1040, 1040-SR, or 1040-NR as an integral part of your complete return.
Step 10: Confirm Eligibility and File Return
If you are a nonresident alien, you cannot claim education credits. Leave Schedule 3 line 3 blank per Form 1040-NR instructions. Nonresident aliens generally cannot claim a foreign tax credit unless they were bona fide Puerto Rico residents for the entire year or meet IRC section 906 exceptions. See Form 1116 instructions for specific requirements.
Sign and date Form 1040, 1040-SR, or 1040-NR to which Schedule 3 attaches. Schedule 3 itself does not require a separate signature. Verify all line entries match supporting form totals before filing. Consult the IRS Where to File page for the current 2021 Form 1040 paper filing address based on your state and whether you are enclosing payment.
Important Limitations
Nonrefundable credits in Part I reduce tax liability to zero but cannot create refunds. Any excess credit is either lost or carried forward, depending on the specific credit rules. Refundable credits in Part II can result in refunds or increase refunds, even if the tax liability is zero.
Married filing separately taxpayers generally cannot claim the child and dependent care credit unless they meet specific hardship criteria, as documented in the Form 2441 instructions. If you can be claimed as a dependent on another taxpayer’s return, certain credits, including education credits and retirement savings contributions credit, are unavailable.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
