Does TurboTax not correctly calculate the maximum solo 401k contribution if you also have a W-2 employer 401k?

[dmertz]

TurboTax's summary page for individual 401(k) contributions in step-by-step mode is gibberish.  Look at the Keogh, SEP and SIMPLE Contribution Worksheet to see the components of your contributions.  Use the SEP Maximize function for calculating your employer contribution and your maximum employer contribution will be the deductible amount minus the dollar amount of elective deferrals that you enter.

[kps9727]

My issue with this is that I've gotten the calculation, but it's not reducing my tax bill as expected.  No matter what I put in to the retirement contributions page (I've tried $0 all the way up to $100k), my tax bill doesn't change.  This doesn't pass the sniff test.

[Onefish]

The TT SEP calculation is doing something wrong, I think.  (More likely operator error, but bear with me.)

I've gotten as far as checking the box to maximize my SEP contribution. But the answer that pops up is several thousand dollars more than the net income from self employment on Sch. C  before calculating the SEP.  So I used a worksheet I found online and came up with what appears to be the correct amount.  I manually entered the amount I manually calculated but when I did a smell test the greater maximized account was entered on Schedule 1.  

Vot gifs, captain? (Only the elderly will remember the Katzenjammer Kids. )   

[RobertB4444]

I liked the Katzenjammers.  But Li'l Abner was my jam.

The maximum SEP contribution is 25% of your net income from self-employment.  You said that the contribution was several thousand dollars more than the net income from your schedule C.  That means that the program thinks that something else is self-employment income and is taking it into account when figuring the contribution.  You need to figure out what else has been entered as self-employment income and correct it.

[astro46]

I am having similar doubts about how turbotax is dealing with sep/simple/roth deductions.

i tried to enter a roth and it tells me it isn't allowed, since there is no earned income, even though it has the schedule C and earned income entered on 1040, along with self employment tax.  but then in the  in the form view, the Roth amount  is listed. 

when I tell it to maximize SEP and then enter a Simple amount $3000 more than the $2420 part time income,  it tells me I can contribute $500 more. . So I try that, and again, tells me the maximum is $500 more.  On and on. 

It also mentions the employer match, though not whether this is intended at part of the entered amount or in addition. 

the keogh/SEP worksheet shows a maximum allowable Simple amount of 16,500,  though the IRS site 

IRA tips for sole proprietor 

 clearly states than Simple contribution can't be more than earned income plus $3000 catch up.

I don't have a good feeling about this. 

[Onefish]

I did find one erroneous amount but even after correcting for that the amount TT says is allowable is almost equal to the total SE earnings. I looked at the Byzantine "Keough/SEP worksheet" and I don't see anything wrong with it. 

This wasn't like this last year; IIRC the calculation went smoothly from the point of the "Maximize" step forward. All the variables are pretty close to the same as before.

[dmertz]

Did you mistakenly mark the Maximize box for an individual 401(k) in addition to marking the Maximize box for a SEP contribution?

[FangxiaL]

Roth IRA contribution is not deductible from your gross income, but the earnings can grow tax-free. If you meet all the requirements when you take a distribution, the earnings are tax free.

@astro46

[Onefish]

No.  I saw that possibility; but I checked the correct box. 

Thanks for looking at this.

[astro46]

@FangxiaL   I am familiar with the qualities of roth accounts.  my comment wasn about how tt was dealing with the input. Along with with the other problems mentioned.

[astro46]

this is the message from tt today:

tt shows an amount as earned income from sched C.  In spite of tt bizarre objections, mentioned previously i had a contribution to roth entered.  roth + trad ira can't equal more than earned income.   so no earned income isn't the issue.  

then, shortly after, while working on state 1040, I get this:

Confused,  TT?

[Onefish]

@dmertz 

This is hard to figure. I wish I could just put the correct amount of SEP into Sch C—but TT doesn't let me delete the erroneous amount the program is calculating. (It's one of the reasons I buy the CD version of TT--it allows override.) 

What's the fix? I'm surprised more users haven't brought up the problem.

[dmertz]

The "you don't qualify for a retirement tax break" message that you mentioned is in regard to a regular traditional IRA contribution, not a SEP contribution determined on the Keogh, SEP and SIMPLE Contribution Worksheet.

[astro46]

@dmertz    i can't say what they had in mind when writing the message,  but it does state that I don't have earned income, which is incorrect.   Plus it doesn't give any options for other types of deductions, applicable to my earned income.   It is a screwy message.

How about the previous interactions about sep and simple where it kept telling me that i could deduct another $500, and kept upping the ante when I increased the deduction.   Plus the worksheet  for keogh/sep/simple had the maximum deduction filled in as 13600.  Perhaps this was the target it was nudging me towards in $500 increments?  Aside from the IRS page stating that maximum simple contribution was earnings plus 3000, with an  upper limit of 13600.  Misguided? misleading?  Confusing?  Wrong info?

Or it telling me that I couldn't do a roth since I had no earning? then looking at the froms view and it had the roth entry filled in with the amount I had suggested?

No other sections of tt are as  confusing and misleading (screwed up?) as the business deductions section.

[dmertz]

You'll have to just look at the Keogh, SEP and SIMPLE Contribution Worksheet to figure out what is going on.