Can turbotax process a contribution to a Cash Balance Plan? If so, how?

A cash balance pension plan is a pension plan with the option of a lifetime annuity. For a cash balance plan, the employer credits a participant's account with a set percentage of their yearly compensation plus interest charges. A cash balance pension plan is a defined-benefit plan.

1.       Login and click Take me to my return

2.       On the left menu, under 2019 Taxes, select the Federal 

3.       Select the Income & Expenses tab along the top. To get to the full listing of Income and Expenses you may be asked to, "select options that apply to you," click Continue and then Check for more tax breaks, then See list of all tax breaks

4.       Scroll down to the Other Business Situations section and click the blue hyperlink Show more

5.       Click Start/Revisit next to Self-Employed Retirement Plans

6.       Next, answer the questions to enter your retirement.

Please feel free to post any additional details or questions in the comment section. 

When I entered $200,000 under defined benefit plan for my wife's 2019 contribution to her cash balance plan and based on net income for her of $261,000, TurboTax is still showing a federal tax due of approximately $27,000.  How can a federal tax be due of $27,000 when her income after the cash balance plan contribution is only $61,000? 

Thanks for the info. When I go through TT Home & Business (DVD install on macOS) I go to Self-employed retirement plans. It first asks if I contributed to a Individual or Roth 401(k) plan. I answer no. Then it asks if I made contributions to any Keogh, SEP, or SIMPLE retirement plans. This is where I am unsure what to answer.

I have a market based cash balance plan ("defined benefit pension plan that uses a cash balance formula") available to me through my partnership that I contributed to in 2019. My plan does not use any of the terms Keogh, SEP, or SIMPLE. Is this where I should enter my contribution?

@gvs802 , have you figured out why the federal tax was above your expectation?

I run what-if scenarios for the upcoming tax season and may end up in a very similar situation.

My assumption is that cumulative deduction for all pension accounts, W2 if you have a second income, etc cannot exceed a certain amount, and that amount varies for single/married. 

Did you solve this?  I am in the same situation this year.

I am also looking for an answer to this question.  All help appreciated

Your post is in an old thread. I'm not sure exactly what your question is, can you clarify?

@alvisahib

First, thanks for replying.

I have a single member LLC (pass-through for tax purposes).  I set up a cash balance plan through the LLC and contributed money to it (let's say $100,000 for simplicity).  I have not been able to find a way to enter this in TurboTax.  The amount should end up on line 16 of Schedule 1 (as it is a "qualified plan").  I would appreciate guidance on how to enter it there.  

It depends. To clarify, are you filing this return as a self-employed business person filing a Schedule C or are you filing a Schedule E?

@alvisahib

I am filing a Schedule C (profit or loss from business).  I separately have to file a Schedule E for a rental property I own which is not part of the business; however, I do not think that is relevant here.  Thank you.

@CatinaT1 @DaveF1006 Any further insight?  Thank you!

Yes, you would enter your contribution in Schedule C of your return since it is a contribution to a defined benefit plan. How you enter this into your Turbo Tax Return depends on the type of Turbo Tax Product you are using.

If you are using Turbo Tax online Self-employed, here is how to enter:

1. Go to the magnifying search button at the top right hand portion of the screen.
2. Type in this exact phrase  sep ira contributions   
3. select the link that says "jump to sep ira contributions"
4. Say no to the question asking if you contributed to an individual or Roth IRA Plan
5. Select yes at the next screen.
6. Select and record your contribution in the Defined Benefit Keough plan box.

If using Turbo Tax Home and Business Software:

1.  Select the Business Tab in the software.
2.  In the screen that mentions let's Gather Your Business Information>scroll to Self-employed Retirement
3. Follow the direction that is given in steps 4-6 listed above.

Let me know if this helps.

@alvisahib

The contribution goes nowhere on Schedule C.  It is not a business expense.  When you enter it as a self-employed retirement Defined Benefit Keogh contribution it will appear as an above-the-line deduction on Schedule 1 line 16.

@DaveF1006 Thank you - very helpful.  This worked (minor modification - the initial question included Keogh, so I had to click "yes", then "no" to Individual or Roth IRA plan, and then enter the information in the Defined Benefit Keogh box.  Much appreciated.

I have a single member LLC (pass-through for tax purposes).  I have set up a defined benefit plan through the LLC and contributed money to it (about $100,000).  How do I enter this amount in TurboTax.  The amount should end up on line 16 of Schedule 1 (as it is a "qualified plan").  Turbo tax is giving the option of contribution to 401K, SEP, SIMPLE etc which have a cap on the deduction amount (much lower than 100,000). On the other hand the defined benefit plan would allow me the full deduction.  I would appreciate guidance on how to enter it in TT.  

If you're self-employed and setting up a Keogh for yourself as the sole participant, a fairly common choice is a defined contribution plan that includes both money-purchase and profit-sharing plans. There's other information on contributions to defined benefit plans. Since defined contribution plans are the most common setup for a Keogh you'd create for your own plan, that's what we are going to look at here -- a sole participant-defined contribution plan.
 

Log in and click Take me to my return

2.       On the left menu, under 2022 Taxes, select the Federal 

3.       Select the Income & Expenses tab along the top. To get to the full listing of Income and Expenses you may be asked to, "select options that apply to you," click Continue and then Check for more tax breaks, then See a list of all tax breaks

4.       Scroll down to the Other Business Situations section and click the blue hyperlink Show more

5.       Click Start/Revisit next to Self-Employed Retirement Plans

6.       Click Yes to KEOGH, SEP, SIMPLE Contributions

7.       Next, answer the questions to enter your retirement. See the Screenshot below:

@sajidini1990 

A contribution to a defined benefit plan would be entered in the box for Defined Benefit Keogh.  TurboTax will place the contribution on line16 of Schedule 1 with the "DB" notation.

Hi Dave, 

I followed your instructions to input the Cash Balance Plan contribution into the Keogh Defined Benefit section of Turbo Tax.  In addition to the Cash Balance Plan, there were contributions to a 401k.  The 1065 k1 has a total of $186,000 on line 13R.  This should be $61,000 for the 401K and $125,000 for the Cash Balance Plan.  I'm now getting an error for the $20,500 employee deferral amount to the 401K.  Please help!

 When you get to Box 13 and enter the $186K in the proper section, record 0's for the remainder of th entries. This should clear the error.

@serpilio 

Thanks for the response Dave.  I made the Cash Balance Plan contribution under the DB Keogh Plan.  I don't have the screen you referenced as I'm using TurboTax Home and Business software.  The K1 line 13R included the Cash Balance Plan contribution and the 401K contribution.  After inputing the Cash Balance Plan amount, I was getting errors on the 401k I entered.   I input the 401k amount into SEP and eliminated the error.  I also then put the total amount from Cash Balance and 401k/SEP in the response to the total K1 amount.  If there was some other way I should have handled the entries, please let me know.