Why does TT say I have no earned income when there is a profit on schedule C,

[astro46]

Schedule 1 line 3 has an amount, from sched C for self employed.  How could that not be earned income? It seems to be ok as earned income for making Simple contribution.  

But other places, like when attempting a Traditional IRA, TT tells me it isn't allowed because I have no earned income. 

Form 8995, QBI,  it show the amount same as sched C amount/Simple contribution  as a negative number.  Similar to what it did the previous year(s?) and a negative carryover from previous year. So each year the negative number carryover get larger.

What is explanation for this? Some misplaced check mark?  How does my earned income (schedule C), which I am paying income tax on,   become a negative number, no income, in other places?

[KeshaH]

If you're using TurboTax Desktop, review the Earned Income Worksheet (Earned Inc Wks) to see how your earned income was calculated. 

If the amount shown still don't make sense for you, we can look at your return and see exactly what you see to  help come to a resolution. The return will be scrubbed and won't include any of your personal details.

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Please reply to this message with your token so that we can further assist you. Let us know all other states that are included on the return.

[astro46]

token is below. (I am astounded that TT doesn't allow copy of the extremely long token number, i had to use a screen  shot)

Please tell me why TT thinks that I have no earned income in regards to taking traditional ira, making traditional IRA excess and non-deductible.  I already took a SIMPLE ira in relation to earnings.  My understanding from IRS website is that one can take both, that one doesn't affect the other.  Can you explain this to me?

Also, I contacted IRS for status of my refund.  They lowered my refund by 25% (ie: increased taxes owed) because social security wrongly calculated.  I checked, number that I entered is number from SS box 5.  TT did the incorrect calculation(?).

thanks

[VolvoGirl]

@astro46   About Social Security 

What usually happens is the IRS changed some other income on your return.  Like the taxable amount of a 1099R you got or you missed entering some income.  Like if a  1099R got entered on the wrong line 1040 line 4 or 5, the IRS would miss it and think you didn’t report it.

By increasing your other income it made more of your SS taxable.

Or There is a new question this year asking if you lived in a foreign place.  People have been answering it wrong or skipping it.  Go back through the Social Security entries.  

[astro46]

KeshaH:   Illinois.

[KeshaH]

Thank you for sharing your token.

TurboTax is showing you have no earned income because of your contribution to the SIMPLE plan. See the screenshot below. Since your net self-employment income minus your SIMPLE contributions is zero, TurboTax has determined that you're not eligible to contribute to an IRA.

@astro46 

[astro46]

is this due to a new ruling? In the past contributions to SIMPLE  and Traditional were treated separately. One not impacting the other as deductions. Both could be taken.  I know that there are high income thresholds that impact IRA deductions,  but this clearly isn't applicable in my case. 

I have not been able to find anything at IRS site clearly indicating the TT position.  

[KeshaH]

This same information can be seen in Publication 590-A (see excerpt for what's considered compensation for traditional IRA below). Note that you can contribute to both a SIMPLE and Traditional IRA as long as you have enough compensation to cover both contributions. 

@astro46 

[astro46]

I thought that the "contributions made on your behalf to retirement plans"  refers to the 2-3% employer matching amount, not the employee contribution.  In this case, being self employed I contributed both the employee and employer match.   The employee contribution isn't made on my behalf, it is made by me. 

Can I ask another question about how TT treated earned income: In the QBI form, it shows my earned income as a negative amount, and a negative carryforward.   Why a earned income as a negative amount, and where could the negative carryforward come from?

thanks for your help. 

[dmertz]

"is this due to a new ruling?"

No.  It has always been the case that the compensation available to contribute to an IRA is reduced by the amount of the self-employed retirement deduction.

[astro46]

thanks for the info about IRA.

how about qbi  In the QBI form, it shows my earned income as a negative amount, and a negative carryforward.   Why a earned income as a negative amount, and where could the much larger negative carryforward come from?

[ThomasM125]

Qualified business income (QBI) would be reduced by contributions to retirement plans, as well as by the deduction for self-employment tax. That could make your QBI negative even though you had net business income.

Also, if you had a negative QBI from business losses in previous years, it would get carried over to future years to offset QBI in those years. Furthermore, investments in public traded partnerships and similar business investments can generate QBI which would be negative if you sustained losses. So, you may have entries from previous years and other business investments that are causing your QBI to be negative in the current year.

[astro46]

the amount of negative qbi for 2024 is the same number shown as income.  the SIMPLE contribution plus deduction for SE equals the income.  There were no publicly traded partnerships, or other business losses, in previous years.    From what you explain, it seems the number for 2024 would be zero,  instead of a negative number that is the same as income.  Strange.  

There is a tiny QBI deduction stemming from etf investments, which is figured separately. 

[astro46]

IRS says that taxable SS was not calculated correctly,  they lowered the amount of the TT stated refund.  Also, since I discovered that my intended traditional IRA contribution was figured by TT as non-deductible and excess (no warning when 'Reviewed'!), and gave me a 6% penalty tax. I hadn't sent in the Traditional IRA yet, and won't, now that I see it isn't, according to TT deductible and excess.   I will have to file an amended to remove the forms 5329 and 8606 from the 1040 and get the 6% penalty returned, and not see an excess contribution going into 2025.

This really disturbing:

I received explanation from IRS about taxable SS being incorrect.   Indeed, using numbers off the TT filed 1040 and the IRS 1040 instructions Social Security Benefits worksheet,  I came up with taxable SS of 3236.    TT came up with 2214.  I don't know how that could happen.  It's pretty simple adding, dividing, and subtracting. 

What will make things worse is that TT deducted the non deductible, excess, undeposited, Traditional IRA from IRA distributions, so the number TT listed on line 4b is wrong. 

And, and,   I have no idea how TT came up with tax on line 16.  Income of $6134 on line 15 should be, from tax table, $613,  not the $184 shown by TT.  How did it do that?  And how is it IRS didn't find this?

Am I missing something(s?) here?

At this point, after correcting the SS amount, taxable IRA distributions, and correcting Tax amount, I may owe money rather than the TT promised refund. 

[VolvoGirl]

Social Security 

What usually happens is the IRS changed some other income on your return.  Like the taxable amount of a 1099R you got or you missed entering some income.  Like if a  1099R got entered on the wrong line 1040 line 4 or 5, the IRS would miss it and think you didn’t report it.

By increasing your other income it made more of your SS taxable.

Or There is a new question this year asking if you lived in a foreign place.  People have been answering it wrong or skipping it.  Go back through the Social Security entries.  

TAX Line 16

Even though it shows up as income on the first page,if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D.  The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet.  It does not get filed with your return.    See this FAQ

https://ttlc.intuit.com/community/forms/help/form-1040-line-11-amount-is-less-than-standard-irs-tax-...

In the online version you need to save your return as a pdf file and include all worksheets to see it.