I believe TurboTax has incorrectly calculated how much I can contribute to my Roth IRA.
My spouse and I are retired, but we have $4,140 in net business income which we split as husband and wife sole proprietors. Each of our schedule Cs shows a profit of $2,070. Based on our combined business income, I contributed $4,000 to my Roth IRA. (My wife did not contribute to her IRA.) Our MAGI is well below the limit for contributing to a Roth. However, Turbo Tax tells me I have an excess contribution to my Roth of $2,076 and that I owe a 6% penalty of $124.
TurboTax calculates my limit as follows:
The Earned Income worksheet divides our business income between Taxpayer and Spouse ($2,070 each) and then deducts one-half of self-employment tax ($146 each) showing earned income for each of us as $1,924. This is the figure Turbo Tax uses to set my Roth contribution limit. However, shouldn't the combined amount of $4,140 which is our Earned Income as a couple be the amount that determines what our total Roth contribution can be?
I can override the totals on the worksheets to eliminate the excess contribution and penalty, but I want to make sure that I am correct. Also, if this is the case Turbo Tax should correct how the numbers flow from the worksheets.
