I have small business . TT let me contribute to 401K solo and SEP IRA. Why it did not allow me to contribute to ROTH IRA saying I do not have earned income.?

[Vladimir101]

I do not have any other employees. I'm the only employer and employee.

[dmertz · Accepted solution]

Deductible self-employed retirement contributions reduce the net earnings available to contribute to a Roth IRA, so by contributing all of your net earnings as deductible 401(k) and SEP contributions there is nothing left to contribute to the Roth IRA.

Note that if your SEP IRA uses the Form 5305-SEP plan agreement, you are not permitted to currently maintain any other qualified retirement plan (per the SEP plan agreement).  Because the employer contribution to the 401(k) plan and to the SEP plan would be the same amount, it generally makes no sense to make the employer contribution to the SEP plan instead of making it to the 401(k) plan.  A prototype SEP plan that spells out the combined contribution limits would be needed to be able to make contributions to both the 401(k) and the SEP plan.

[Vladimir101]

So, I need to contribute to ROTH IRA first, and then what is left to 401k?

[DMarkM1 · Accepted solution]

Doesn't have to be first you just need some earnings left to contribute to a Roth.  Keep in mind there is a contribution limitation based on your income.  Also, your total contributions to Traditional and Roth IRAs is limited to 6500 (7500 if age 50 or over).  

[Vladimir101]

I removed all contributions to 401K solo and SEP IRA. My AGI is $89,983.00. My profit from business is $27,993. But Turbo Tax still states I cannot put any money to ROTH IRA. Why?

[Vladimir101]

I think I maybe missunderstood the TT reply. It says: Based on what you've entered you don't qualify for IRA deduction. Your IRA deduction is $0.

I think it means the taxes will not be reduced, but I can make a contribution to ROTH IRA. Am I correct?

[KristinaK]

Based on your AGI, you should be able to contribute to a Roth IRA. However, it is already too late to make the contribution for 2023. 

And just to clarify, solo 401K and SEP IRA are not the same as Roth IRAs.