My consulting business income is $3,500. I should be able to contribute $3,500 to Roth IRA. But Turbo Tax online insists I can only contribute $3,253; why?

[VolvoGirl · Accepted solution]

You have to subtract out the deductible half of the self employment tax from the net profit on Schedule C.  It’s the amount on 1040 line 27.

[VolvoGirl]

Found my longer answer.  For an IRA contribution.  If you only have self-employment income you can only contribute up to your net profit reduced by the deduction allowed for one-half of your self-employment taxes.  See IRS publication 590 <a rel="nofollow" target="_blank" href="http://www.irs.gov/pub/irs-pdf/p590a.pdf">http://www.irs.gov/pub/irs-pdf/p590a.pdf</a>

So check 1040 line 27.  You have to deduct that amount from your Schedule C Net Profit.  That will give you the allowed contribution for the 1099Misc income.