I'm an independent contractor being paid by one company. My 1099-NEC from them was for $7,507.00. I also earned $135 from another entity for a one-time project . I assumed that $7,642.00 was my earned income, and that I could make a Roth IRA contribution in that amount (I'm 69 y.o.), however, Turbo Tax apparently reduced my earned income amount by my business expenses ($515) and one-half of my self-employment (Soc. Sec.) taxes ($494) so I can only make a contribution of not more than $6,633. I referred to IRS publication 590 (IRA contributions) and it states that:
If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of:
The deduction for contributions made on your behalf to retirement plans, and
The deduction allowed for the deductible part of your self-employment taxes.
It doesn't mention anything about other business expenses. But I assume that net earnings also means income less business expenses? I just want to make sure. Funny that it doesn't mention the self-employed health insurance deduction. Thanks
