Yes, your wife can contribute to a SEP-IRA and a traditional IRA. According to the IRS: "For a self-employed individual, contributions are limited to 25% of your net earnings from self-employment (not including contributions for yourself), up to $61,000 for 2022 ($58,000 for 2021; $57,000 for 2020). You can calculate your plan contributions using the tables and worksheets in Publication 560."
It sounds like your your wife/TurboTax is calculating a Solo-401(k) contribution, and not a SEP.
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