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coona2017
New Member

My K1 shows Net earnings of $12,512. Turbotax only shows net income of $11,628. This reduces my IRA contribution.

Guaranteed payments on my K1 should show up as earned income. This is not happening.

1 Best answer

Accepted Solutions
VolvoGirl
Level 15

My K1 shows Net earnings of $12,512. Turbotax only shows net income of $11,628. This reduces my IRA contribution.

Yes that is right.  You have to reduce it by 1/2 of the SE tax.  I worked it out.  The 11,628 is right.

12,512 x .9235 = 11,554.83

11,554.83 x 15.3% = 1,767.89 SE tax ÷ 2 = 883.94

Then... 12,512 - 883.94 = 11,628

View solution in original post

6 Replies
TaxGuyBill
Level 9

My K1 shows Net earnings of $12,512. Turbotax only shows net income of $11,628. This reduces my IRA contribution.

I assume you mean an IRA contribution for you, and an IRA contribution for your spouse, right?  The limit to contribute to an IRA is $5500 ($6500 if age 50 or older) a year.
dmertz
Level 15

My K1 shows Net earnings of $12,512. Turbotax only shows net income of $11,628. This reduces my IRA contribution.

It's also possible that it's a SEP IRA contribution that is being limited.  Under these circumstances, a SEP IRA contribution would be limited to 20% of $11,628 = $2,326.
VolvoGirl
Level 15

My K1 shows Net earnings of $12,512. Turbotax only shows net income of $11,628. This reduces my IRA contribution.

Yes that is right.  You have to reduce it by 1/2 of the SE tax.  I worked it out.  The 11,628 is right.

12,512 x .9235 = 11,554.83

11,554.83 x 15.3% = 1,767.89 SE tax ÷ 2 = 883.94

Then... 12,512 - 883.94 = 11,628

View solution in original post

VolvoGirl
Level 15

My K1 shows Net earnings of $12,512. Turbotax only shows net income of $11,628. This reduces my IRA contribution.

FYI - the SE tax is 15.3% of 92.35% of your Net Profit.

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>
coona2017
New Member

My K1 shows Net earnings of $12,512. Turbotax only shows net income of $11,628. This reduces my IRA contribution.

Thank you!  In prior years net profit after self employment tax was significantly higher than our maximum contribution.  I didn't pay enough attention to the tax implications.
fanfare
Level 15

My K1 shows Net earnings of $12,512. Turbotax only shows net income of $11,628. This reduces my IRA contribution.

you can remove any excess contribution (plus earnings ) now as long as you don't report  it on your return.
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