I have 1099-NEC income, but TurboTax is not allowing me to make a Roth IRA contribution, because it thinks my earned income is zero. Why?

[bhb59]

The 1099-NEC income is cascading to the business income section, but showing zero income where I entered it.  I believe this is why it thinks I have no earned income.  Can I change this?

[dmertz · Accepted solution]

The amount of compensation available to support an Roth IRA contribution is net profit (Schedule C line 31) reduced by the amounts on Schedule 1 lines 15, 16 and 20.

Also, any excluded foreign-earned income is not compensation that will support an IRA contribution.

[bhb59]

Hi dmertz,

Thank you very much for your reply.  You are exactly right and you solved my problem.  I maximized my contribution to a Solo 401k and thus could not also make Roth contributions. It's worth noting that the problem was further confounded by the fact that even when I unchecked the "maximize contribution" box for the Solo 401k, the software was still trying to contribute the maximum amount.  The only way to resolve it was to go back to the worksheet in "Forms" and uncheck the box there.  Again, many thanks for your help!

[Jerry77]

Hi dmertz,

I have a similar problem with turbotax saying I have zero earned income to support a Roth contribution.

I have biz income from our LLC and nec income (non-business). The total is about 11k. We bring our LLC net income over through a Schedule E. Help!

[dmertz]

@Jerry77 , since you say the income appears on Schedule E, I assume that the LLC is a partnership that provides you with a Schedule K-1 (Form 1065).  The amount of income from self-employment from this partnership that will support an IRA contribution is the amount reported with code A in box 14 of this Schedule K-1, minus the sum of the deductible portion of self-employment taxes attributable to this business income and any deductible self-employed retirement contribution made from this business income.

I'm not sure what you mean by the income reported on Form 1099-NEC being non-business income since amounts reported on From 1099-R usually represent income from self-employment.

[Jerry77]

Thanks for your reply!

I should clarify-we have an LLC but file as an S-Corp. So we use the 1120-S form. The 1099 NEC income I mentioned comes from my management expenses as a trustee for the family trust, all outside of our business. I hope this makes sense!

[dmertz]

Compensation from the S corp that will support an IRA contribution is the amount shown in box 1 of the W-2 that you should have received from the S corp if you provided services to the S corp.  The S corp is required to pay a reasonable wage.

Nothing shown on a Schedule K-1 (Form 1120-S) is compensation that will support an IRA contribution.