Why my SEP401k bank and irs webiste shows I qualified 19k and 25%of net propfit($53100) pre tax contribution, but turbo tax only allow me contribute $9620?

[dmertz]

$9,620 sounds like just the limit on employer contributions and does not include the $19,000 of elective deferral.  In TurboTax, make sure that you are using the Maximize function for an individual 401(k) contribution, not the Maximize function for a SEP-IRA contribution.  SEP plans only permit employer contributions while individual 401(k) plans permit both the employer contribution and employee contributions.

Also, the maximum employer contribution for someone who is self employed is 20% of net earnings.  Net earnings are net profit minus the deductible portion of self-employment taxes.

TurboTax implements these calculations properly.

[gingersugar]

Thank you for explaination. I did try everything including individual 401k and maximun it. But still the limit is 9620. I have accounting degree, I know it is not right. What should I do? I called turbo tax specialist line, automatic answer system without real person to resolve it.

[dmertz]

Was the $19,000 a Roth contribution to the individual 401(k)?  If so, that uses up the entire employee regular contribution limit and is not deductible.  If so, only the employer contribution, which must be made to the traditional 401(k) account, is deductible.

To see the calculation, examine the Keogh, SEP and SIMPLE Contribution Worksheet in TurboTax.  This TurboTax worksheet implements the Deduction Worksheet for Self-Employed from Chapter 5 of IRS Pub 560.