Self employed (single member LLC), Roth IRA contributions. Under what circumstances should I list this in the TurboTax business section?

[Anonymous]

I have a Roth IRA I'd like to contribute to, with the gross income of my single member LLC. Should I list this under the Self-Employed Retirement section of TurboTax? Why or why not? (If yes, when is it NOT listed in the business section?)

[MiriamF · Accepted solution]

There are two reasons to list contributions to a Roth IRA:

• To claim a saver's credit. The income limits and credit rates for 2016 and 2017 are in the screenshot below.
• To make sure that you haven't contributed more than you are permitted by law. The maximum contribution is the same for traditional and Roth IRAs: $5,500 if you are under age 50, $6,500 if you are 50 or older. There are also income limits for contributions (see the second screenshot below). If you contribute more than the government allows and fail to remove the excess contribution in a timely manner, your Roth could lose its status as a qualified plan, meaning that you would have to pay tax on the earnings.

There is no particular advantage to listing your Roth contribution as a business deduction. There is no special credit for a single member LLC, and none of the contribution or income limitations would be affected.

The instructions on how to enter the Roth IRA contribution are as follows, should you choose not to list it under  your business:

• Log into TurboTax and open your tax return.
• Type roth ira contributions in the search bar and click search.
• Click on Jump to roth ira contributions.
• On the Traditional IRA and Roth IRA screen, click on Roth IRA and continue with the onscreen questions. 

[dmertz]

Roth IRA contributions are *never* reportable as an employer contribution.  They must never appear on Schedule C or on a business tax return.  Roth IRA contributions are always personal contributions, made from money paid to the employee (or from net earning from self-employment).