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Level 1

How can I make both a SEP and Roth IRA contribution despite low-ish W-2 and Self-employed income?

I'm an experienced Turbo Tax user, but I'm stumped.  This year I had a child and became mostly stay-at-home, but I still earned $6693.50 on W-2s, and $1188 as my profit from my business (self-employed).  (My husband is employed and we file jointly).  My husband and I both maximized our Roth IRAs at $5500 each.  I planned to maximize my contribution to my SEP, which according to the worksheet in IRS publication 560, should be $100.36.  However, in the Business--> Less Common Business Situations --> Self-Employed Retirement, when I enter my Roth contributions my Federal refund changes and when I mark "Maximize my SEP contribution" it says $0.  

I thought the Roth IRA and SEP contributions were supposed to be completely independent?

Why is my Federal refund changing at all when I enter my Roth contributions??  I thought only traditional IRA contributions affected your taxes?  

Should I not be entering the Roth contributions in the business section because they aren't from my self-employed income?

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Accepted Solutions
Level 20

How can I make both a SEP and Roth IRA contribution despite low-ish W-2 and Self-employed income?

Do not enter any part of your Roth IRA contribution under Business--> Less Common Business Situations --> Self-Employed Retirement.  It is not a SEP contribution or a Roth 401(k) contribution.  Your (personal, not business) Roth IRA contribution must be entered under Deductions & Credits -> Retirement and Investments -> Traditional and Roth IRA Contributions.

Your maximum SEP contribution can only be calculated based your $1,188 of net profit from self-employment, giving you a maximum SEP-IRA contribution of $221.

Make sure that you have indicated that your $1,188 of net profit from self-employment is appearing on Schedule C line 31.

1 Reply
Level 20

How can I make both a SEP and Roth IRA contribution despite low-ish W-2 and Self-employed income?

Do not enter any part of your Roth IRA contribution under Business--> Less Common Business Situations --> Self-Employed Retirement.  It is not a SEP contribution or a Roth 401(k) contribution.  Your (personal, not business) Roth IRA contribution must be entered under Deductions & Credits -> Retirement and Investments -> Traditional and Roth IRA Contributions.

Your maximum SEP contribution can only be calculated based your $1,188 of net profit from self-employment, giving you a maximum SEP-IRA contribution of $221.

Make sure that you have indicated that your $1,188 of net profit from self-employment is appearing on Schedule C line 31.