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Not applicable
posted May 31, 2019 9:51:02 PM

Making a SEP account contribution is not affecting my total tax owed.

If I put 0 or the maximum allowable, my federal tax due is not changing. Why would this be?

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1 Best answer
Expert Alumni
May 31, 2019 9:51:04 PM

The SEP deduction lowers yours Adjusted Gross Income. However, the SEP deduction does not lower your net income from self-employment on Schedule C. As a result, it does not reduce your self-employment tax of c 15%.

If the contribution is not reducing your tax liability at all, that means your "regular" tax rate is already 0%. You owe self-employment tax on your net income even if your "regular tax" is $0.

You might want to look at your 1040- pay close attention to the amounts on lines 56 (regular net tax) and 57 (SE tax).

  • My Account (up top)
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1 Replies
Expert Alumni
May 31, 2019 9:51:04 PM

The SEP deduction lowers yours Adjusted Gross Income. However, the SEP deduction does not lower your net income from self-employment on Schedule C. As a result, it does not reduce your self-employment tax of c 15%.

If the contribution is not reducing your tax liability at all, that means your "regular" tax rate is already 0%. You owe self-employment tax on your net income even if your "regular tax" is $0.

You might want to look at your 1040- pay close attention to the amounts on lines 56 (regular net tax) and 57 (SE tax).

  • My Account (up top)
  • Tools
  • View Tax Summary
  • Preview 1040