Should ROTH IRA Computation Limit Worksheet block 7 wages and other income be the same as Schedule C Block 31?

[davidbelc]

I have earned income of: $6,941 (on Schedule C)

The ROTH IRA Computation Limit Worksheet shows my Earned Income as: $4,450 (Block 7)

For a difference of: $491.

When entering my 2016 Roth IRA Contributions ($2256 for me and $4,686 for my wife) Turbo Tax reports an overpayment because it is working on the ROTH IRA Computation Limit Worksheet instead of the $6,941 from Schedule C.

Why isn't the $6,450  from IRA Worksheet using the same $6,941 as Schedule C?

[ChristinaS · Accepted solution]

Your earned income for Roth contribution purposes also takes into account 1/2 of your self-employment tax.

Net income from Schedule C= $6941

Less 1/2 of SE tax=                  (490)   =     {($6941 *.9235) *.153}/2

The result in Turbo Tax seems correct.

Self-employment income.   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of:

• The deduction for contributions made on your behalf to retirement plans, and

• The deduction allowed for the deductible part of your self-employment taxes.

[davidbelc]

Thanks for the rapid response....

[ChristinaS]

You're welcome!