SEP Contributions

I am self employed and my adjusted gross income is $18,885 for 2020. I received $16,911 in unemployment due to COVID. Turbo Tax has calculated that I am only allowed to contribute $3,510. I have read that I can contribute up to 25% of income. I don't understand why it is showing that my maximum contribution is $3510? Am I not able to contribute from the income from unemployment? Even if that was the case, 25% of $18,885 is $4,721.25 not $3,510. If it does include the unemployment, shouldn't I be able to contribute up to $8,949? Any help is appreciated. Thank you

896

Level 15

Mar 20, 2021 1:44:18 PM

from a previous answer:

For self-employed people, that rate is actually 20%. In researching this, I found a helpful IRS link that you should be very interested in. Pay particular attention to a worksheet entitled Deduction Worksheet for Self-Employed. Here it instructs you to enter your deduction for your self employment tax. Your deduction that is listed as an adjustment to income is listed in Schedule ! of your return and is 1/2 of your actual Self-employment tax imposed on your net earnings.

Level 1

Mar 21, 2021 8:19:45 AM

Thank you.

Why sign in to the Community?

SEP Contributions