Can the SEP IRA contribution be based on individual Schedule C?

[bballshinobi]

I have 3 Schedule C businesses. Business A was very profitable last year, but B and C were not. Can I calculate the SEP IRA contribution based only on Business A by making the income adjustment to offset Business B's and C's losses?

For example, A has $100k profit but B and C have $100K losses. I want to make SEP IRA contribution only based on Business A but Turbotax is calculating my net income as zero thus no contribution. Am I allowed to only use Business A's income for the SEP IRA contribution calculation?

[LeonardS]

Yes, you may use the Schedule C with the 100K profit for your SEP IRA contribution.  You do not have to combine your individual Schedule Cs you may only use the income from one Schedule C.

[dmertz]

No, you can't do that.  Because of the common ownership, section 414(c) of the tax code requires that these businesses be treated as a single employer for the purpose of a retirement plan.  Without this requirement, compensation to make a SEP contribution could be manufactured by one of the individual's sole proprietorships selling services to another, reporting the income on the Schedule C of the selling business and the expense on the Schedule C of the purchasing  business.

TurboTax properly aggregates the profit and loss from these multiple businesses when determining the amount to include on line 1a of the Keogh, SEP and SIMPLE Contribuiton Worksheet.

[bballshinobi]

Hello @LeonardS , can you address what @dmertz said? I just want to make sure I am doing it correctly. 

My crude understanding of his point about the controlled group is that you have to treat all employees under all businesses the same not i.e. contributing the same %. However, if I am the only employee of all 3 businesses, that shouldn't be a concern, right? 

[AmyC]

Here are the IRS SEP rules and more information. Please see SEP Checklist as you own more than one business and need to go through those steps.