Hello! We've run into a snag on the IRA deduction. My wife and I have no W-2 income, but she does have contractor income that is reported as nonemployee compensation on box 7 of 1099-MISC. Any of this should be deductible as her IRA contribution (up to the annual limit). She also has sales of books, on which she receives royalties on box 2 of 1099-MISC. These do not count as compensation and should not be able to be used as an IRA contribution. Overall she loses money on her business, so Schedule C shows a net loss.
It appears that the TurboTax program uses the Schedule C net gain (loss) entry as the IRA contribution limit, which is incorrect - it should only use the compensation portion, and it shouldn't matter if there are also losses or a net loss. If we enter just the gross profits, the program lets us deduct the IRA up to the annual limit, even past what is compensation. When we enter the expenses, so there is a net loss on Schedule C, it won't let her contribute anything to the IRA.
Conclusion: The program is not separating out the compensation portions as it should. Is there a way to work around this? We're using TurboTax Home and Business.
