My wife and I are partners in an LLC (Engineering) Partnership that contributes to an SEP-IRA for each of us. We have no employees & there are no complications with the business (just income, expenses, and SEP-IRA Contributions). It is my understanding that this should not be booked as an expense for the company (we book it as an equity draw) & report the income on our personal tax return. As such, the Business Net Taxable Income is Gross Earnings less Expenses (not including SEP contributions). The net earnings are reported on Schedule K-1, Line-1, and the SEP Contribution is Line 13 (Other Deductions) with Code R. TurboTax Business 2023 is filling out Box-1 and Box-13 correctly, but it is deducting the SEP contributions from the Current Year Income in Part-II, Line L (Partner's Capital Account Analysis). This makes the Ending Capital Account Value too low by the amount of the SEP Contribution. TurboTax Business 2023 also includes the SEP contribution on Form 1065, Schedule K, Line 13e. This behavior is different than previous versions of TurboTax Business (which did not report the SEP contributions anywhere on Form 1065, except Schedules K-1). I also note that the "Schedule K , Reconciliation Worksheet" in Form 1065 now includes a column for "Other Deductions", which is new for 2023. I am not sure if I erred in prior years, or if there is something incorrect for 2023. My questions may be summarized as follows:
1. Should non-employee (e.g. Partner) SEP contributions be listed on Schedule K, line 13e - or is this only for SEP contributions to employees?
2. Should Schedule K-1, Part-II, Line L "Current Year Net Income" be reduced by the non-employee (partner) SEP contributions as an expense?
I believe the tax implications do not change between the two options - the tangible differences seem to be limited to the Turbotax "Balance Sheet", and reporting on Form 1065 Line 13e.
I am not sure which is correct - the way I did it before, or the way that Turbotax Business - 2023 seems to want to steer me now. Any help is appreciated.
