Incorrect calculation of Earned Income for determining maximum IRA contributions in 2025

[jitterbugbug]

Hello,

I am pretty convinced that Turbo Tax is incorrectly adjusting down the maximum contributions my husband and I can make to our Roth IRAs for 2025.

Background:

Turbo Tax Product: 2025 Desktop Home & Business

Tax info:

Married, filing jointly

Ages: both of us are over 65

AGI: $149,066

Taxable Income: $99,108

Roth contributions for 2025: We each contributed $8000

Husband is retired, no earned income

I am self-employed part-time and some of my income is from being a Notary

My profit or loss from Business for 2025 was $17,397

The Self-Employment tax deduction is $1109, reducing my Earned Income amount to $16,288.

However, in the Forms View, the Earned Income Worksheet lists my Earned Income  (line 4) as $14,580 -- a difference of $1708.  ($15,689 total SE income minus $1109 SE tax deduction) . 

I spent a lot of time on Turbo Tax in form view, looking at the Schedule C, the SE Adj worksheet, Schedule 1, etc. trying to figure out where this $1708 difference came from.  Finally I noticed the amount of my Notary income was $1708. I know that I don't have to pay SE tax on Notary income but so far as I have researched, my Notary income should still count toward the Earned Income figure that determines what our IRA contribution thresholds are for the year. Yet clearly, in calculating the maximum amount my husband and I can contribute to our IRAs, Turbo Tax is subtracting my notary income from my earned income. Instead it is telling me that my husband over- contributed by $1420 in 2025. How can I fix this?

Thank you

[dmertz · Accepted solution]

It appears that TurboTax considers income from being a Notary Public as not being earned income that will support an IRA contribution because a Notary Public is a public office.  TurboTax not treating income from being a Notary Public as being income that will support an IRA contribution is the way that TurboTax has been implemented for many years.  However, I'm not sure that TurboTax developers have interpreted 26 U.S. Code § 1402(c)(1) correctly:

(c)Trade or business

The term “trade or business”, when used with reference to self-employment income or net earnings from self-employment, shall have the same meaning as when used in section 162 (relating to trade or business expenses), except that such term shall not include—

(1)the performance of the functions of a public office, other than the functions of a public office of a State or a political subdivision thereof with respect to fees received in any period in which the functions are performed in a position compensated solely on a fee basis and in which such functions are not covered under an agreement entered into by such State and the Commissioner of Social Security pursuant to section 218 of the Social Security Act;

I think that:

other than the functions of a public office of a State or a political subdivision thereof with respect to fees received in any period in which the functions are performed in a position compensated solely on a fee basis and in which such functions are not covered under an agreement entered into by such State and the Commissioner of Social Security pursuant to section 218 of the Social Security Act;

describes a Notary Public.

I have been unable to find any guidance on this subject from an authoritative source, in particular, nothing from the IRS.

[jitterbugbug]

Thank you for your response. That's entirely possible. Can I ask, do you work for Turbo Tax in any way or are you someone responding in the community? 

[dmertz]

I just read the tax code and IRS guidance.