I took a look at IRS Pub 560 but it was too complex for me to understand. TT Online told me it will guide me through to figure out but it didn't. Do I have to finish all the entries and would TT tell me up to how much I can contribute to SEP-IRA? (This is about 2016 tax. Am I too late?)
Yes, you must finish all of the Wage and self-employment entries for TurboTax to be able to accurately calculate your maximum permissible SEP-IRA contribution.
Your maximum permissible SEP-IRA contribution is 20% of your net earnings from self-employment. Your net earnings from self-employment are your net profit from self-employment minus the deductible portion of your self-employment taxes (Form 1040 line 27). Under some circumstances, the deducible portion of your self-employment taxes can depend on the amount of Social Security wages shown in box 3 of your W-2 from your W-2 job.
In TurboTax Self-Employed, go here:
Yes, you must finish all of the Wage and self-employment entries for TurboTax to be able to accurately calculate your maximum permissible SEP-IRA contribution.
Your maximum permissible SEP-IRA contribution is 20% of your net earnings from self-employment. Your net earnings from self-employment are your net profit from self-employment minus the deductible portion of your self-employment taxes (Form 1040 line 27). Under some circumstances, the deducible portion of your self-employment taxes can depend on the amount of Social Security wages shown in box 3 of your W-2 from your W-2 job.
In TurboTax Self-Employed, go here:
I finished entering all the information for fed and state, and TT Online (Self-employed version) is asking me if it should file my return. I don't think I should before making a SEP-IRA contribution. It has never suggested me I could contribute to my SEP-IRA account. Does that mean TT Online determined I wouldn't save or I am not eligible?
Use TurboTax's search to find "self-employed retirement".
In TurboTax Self-Employed, visit Wages & Income -> Business Items -> Business Deductions & Credits -> Self-employed retirement plans. If TurboTax switches to the Home & Business format, it's under Business Income and Expenses -> Less Common Business Situations -> Self-employed Retirement.
Hmmm, I don't see "Wages & Income" or "Business Items" in my TT Self-Employed version. Please understand that I have not contributed to SEP-IRA yet. I want TT Online tells me how much I could contribute to minimize my tax. TT doesn't have such function?
Yes, I entered "self-employed retirement". I went through first few pages and all are about how to file the contribution amounts, not about having TurboTax calculate the max amount. I'm giving up on TurboTax at this point...
On the Your Contributions page for Keogh, SEP and SIMPLE contributions, next to the SEP box there is a Maximize box to mark. Mark that box and TurboTax will automatically calculate your maximum permissible SEP contribution and include in on Form 1040 line 28.
I can't find the "Contributions page for Keogh, SEP and SIMPLE contribution". Is it under Federal tab's "Deductions & Credits" sub-tab? I only see "Traditional and Roth IRA Contributions" there.
Sorry, the search function in online TurboTax is severely lacking compared to the search in the CD/download version of TurboTax. See the screenshots that I added to my answer above.
Thank you for taking screen shots. I had visited the section but it only let me enter the contribution I made. It doesn't have a "Maximize" button and it doesn't tell me how much I can contribute to maximize tax saving. Do I have to buy a download version?
I've added more screenshots in a separate answer since each answer is limited to 5 screenshots.
Thank you! I could finally have TT calculate the max allowed contribution. (I have to say the user interface is not intuitive.) But I can't trust the outcome. It is suggesting the amount that is more than 60% of my self-employment income. If I follow the instructions in IRS pub 560, the absolute upper limit is 20% of the earning.
Let me ask another question; after I go to the File section, do I have a chance to review the 1040 and make corrections to numbers before actually perform e-filing?
Did you perhaps also mark the maximize box for an individual 401(k)? If you were under age 50 in 2016, a maximum individual 401(k) contribution on about $44k of net profit would result in 60% going to the 401(k). If you were over age 50 in 2016, $58k of net profit would result in 60% going to the 401(k).
You might do best to delete your Keogh/SEP Wks and remark the SEP Maximize box. To delete the form, in online TurboTax click My Account -> Tools -> Delete a form, then click the Delete link next to Keogh/SEP Wks.
Yes, you'll be prompted to download a pdf file of your tax return to examine or print before e-filing.
Thanks you! Now it is giving me a number that sounds more likely.