TurboTax not calculating SEP max correctly?

[poprocks]

My 1099 income was ~76K with a ~9k loss in Schedule K-1. When I have TurboTax calculate my max SEP IRA contribution (traditional SEP in TurboTax), it says $30k - much higher than 25% limit. What's going on?

[dmertz · Accepted solution]

Given correct input, TurboTax does calculate the maximum SEP contribution correctly.  Examine TurboTax's Keogh, SEP and SIMPLE Contribution Worksheet.  Perhaps you have also marked the Maximize box for an individual 401(k) contribution or you have somehow incorrectly entered your self-employment income.  The maximum permissible SEP contribution is 20% of net earnings.  Net earnings are net profit minus the deductible portion of self-employment taxes.  If your only self-employment income is the ~$76k, your maximum SEP contribution is ~$14,100.

I'm not sure how a Schedule K-1 would have anything to do with your self-employment income unless it was from a partnership that is separate from your other self-employment income.  If it's from a partnership, there is an amount in box 14 with code A, and you have separate self-employment income from a separate business, there are likely additional restrictions on how much you can contribute to a SEP IRA.

[poprocks]

Hi dmertz,

Thank you for responding. I have checked everything multiple times - the only Maximize box selected is the one for Traditional SEP. There is a separate business I'm an investor in, but no income, it's a loan I made that's being repaid slowly but that still doesn't add up to get to that $30K value. Is there a way to see how the calculation is being made?

[dmertz]

The calculation is done on TurboTax's Keogh, SEP and SIMPLE Contribution Worksheet as I mentioned above.

[poprocks]

Hi dmertz,

I was finally able to get to the form and it looks like TT put in adjustment to net earnings of the same amount as my 1099 which doubled my basis for the calculation - this was in Part II Q 1b - Enter any non-farm adjustment to non-farm net earnings for use in the calculation of maximum deductible contribution. Do you know why this would be? And should I just remove that amount?

[dmertz]

This is a user-entered value that is added to the net profit calculated on Schedule C.  It seems the when asked for any adjustments that you entered your actual net profit.  Delete the entry.

[poprocks]

Thank you again for your help. I did delete the entry and that fixed the issue. So odd as I don't remember doing it but must have somehow. Thanks again!