Self-employed Retirement contribution not changing refund

Forum|Forum|5 years ago
January 27, 2021
1 reply
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Self-employed and set-up a Profit Sharing Keogh account in 2020. I have profit from business of $28,990. TT showing I have business taxes of $4,096. BEFORE entering my Profit Sharing Keogh contribution, I had a Federal refund of $461.

The Federal refund DID NOT change after entering a Profit Sharing Keogh contribution of $22,971 (maximum calculated by TT). I clicked "Done with Business" and was expecting to see my Federal refund increase significantly because of this contribution; but no change occurred.

Does this mean I have entered the contribution incorrectly? This is the first year I will have contributed to my Profit Sharing Keogh account and I'm really eager to see what it does to my tax liability. Will it happen later in TT? If so, when? Or have I made a mistake? Thank you.

VolvoGirl

Level 15

I'm not 100% sure but it only will reduce any regular income tax you owe. It won't reduce the self employment tax. So if your regular income tax was already low or zero it won't change. It just reduces your AGI so you get taxed on a lower amount. But not the self employment tax on your Net Profit.

sonofdodAuthor

Level 4

How would I go about checking in the forms to see what change (if any) occurred by making the Keogh contribution?

I was really expecting the refund to increase.

It's great to be able to contribute to my retirement like this but I was really trying to reduce my tax liability but that doesn't appear to be happening.

What am I missing?