There are a number of reasons that this could be a correct indication; it's unlikely that it's due to a software bug. Since you appear to be using the CD/download version of TurboTax, switch to forms mode and examine your Form 1040 with and without the SEP contribution entered to see how the self-employed retirement deduction that appear on line 28 and corresponding reduction AGI is affecting your tax return overall. Do the same for your state tax return. You can also print and compare forms side-by-side.
