IRA Contribution and Pension Plan coverage

[sdarden]

I'm trying to contribute to my 2022 traditional (and SEP and Roth) IRAs, but the program thinks I'm covered by a pension plan which I am not. I'm self employed, but do have about $1200 W2 earnings and receiving a pension from the Army. Where do I go to tell the program that I'm not covered?

[dmertz]

A contribution to the SEP IRA makes you covered.  (It's generally believed that a SEP contribution makes you covered for the year in which you make the contribution.  However, TurboTax treats you as covered in the year for which you make the contribution.

If the 2022 Form W-2 has box 13 retirement-plan marked, you are covered for 2022.

[MinhT1]

TurboTax knows whether you are covered by a retirement plan at work from the entry in box 13 of your form W-2.

If you are not covered, box 13 of form W-2 should NOT be checked.

If in doubt, please revisit your W-2 and check.

[sdarden]

I thought I could contribute up to 25% or $66k. It will only let me contribute $4245 to the SEP. I wanted to put $3255 in my traditional, for a total of $7500. It only allows me a deduction of $1110 because im covered by a retirement plan. Why? how do I work around that?

[sdarden]

Block 13 on my little w2 is not blocked. I do have a SEP IRA, so Im told that is my retirement plan. It is not allowing me a full deduction for some reason. any ideas on what i need to do?

[dmertz · Accepted solution]

As self-employed, you are your own employer.  A SEP plan is an employer-provided retirement plan, so  your contributions to a SEP plan established under your sole proprietorship constitute active participation in an employer-provided retirement plan.

For the self-employed, SEP contributions for 2022 are limited to $61,000 or 20% of net earnings, whichever is less.  Net earnings are net profit minus the deductible portion of self-employment taxes.  ($66,000 is the limit for SEP contributions from your 2023 net earnings.)