I'm entering contributions to a self-employed SEP and 401k for the first time. I don't understand why I would "adjust" my self-employed income or when to do that.

[CR47]

The TurboTax page that comes up after I enter my contributions is titled "Adjusting Self-Employment Income". It says I can adjust my income. What's a valid reason to do that? Can I adjust it by the amount of the contribution?

[MinhT1]

The IRS says in this document:

To calculate your plan compensation, you reduce your net earnings from self-employment by:

• the deductible portion of your SE tax from your Form 1040 return, Schedule 1, on the line for deductible part of self-employment tax, and
• the amount of your own (not your employees’) retirement plan contribution from your Form 1040 return, Schedule 1, on the line for self-employed SEP, SIMPLE, and qualified plans.

[MinhT1]

The IRS says in this document:

To calculate your plan compensation, you reduce your net earnings from self-employment by:

• the deductible portion of your SE tax from your Form 1040 return, Schedule 1, on the line for deductible part of self-employment tax, and
• the amount of your own (not your employees’) retirement plan contribution from your Form 1040 return, Schedule 1, on the line for self-employed SEP, SIMPLE, and qualified plans.

[Smith16]

I see that this question and answer were from 2022. But I am running into this same issue for 2024. How in the world would TT expect someone who is a user of TT Home & Business to know how and when to "reduce self employment income. " Isn't this what someone pays for TT to do for them? Why wouldn't the program automatically do this when one is entering contributions to their Solo 401k plan and wanting to "max" the contribution limits?