SEP Contribution Calculation Issue

This is a known issue. Programmers are working on it. 

As @Bsch4477 stated, this is an issue that is being worked on.

 

TurboTax programmers are currently implementing some recent IRS changes for reporting SEP and SIMPLE plan contributions. While there isn't an estimated date when the changes will be done, you can test this by editing your W-2 every 5-7 days to check on the status. 

 

On January 8, 2024, the IRS released a notice (within that bulletin, search for Employee Plans) describing many changes required to implement the Secure Act 2.0. If you try to enter Code S for Box 12 of your W-2, you may see this message: "We're updating how SEP and simple plan contributions are reported on the tax return based on new guidance from the IRS."

 

Section 601 of the Secure Act 2.0 refers specifically to Simple and SEP Roth IRAs. Code S in box 12 defines how to handle a SIMPLE plan. 

 

These last-minute IRS (and law) changes often cause implementation delays for TurboTax and other tax processors.  

 

Please be patient while TurboTax works to understand all the ramifications of this IRS Notice then code and test the changes. 

 

@jammer2000 

 

I have received 2 updates to TurboTax since I reported this issue and the issue persists.  Will there be a notification or something when this issue is resolved?  Should I use another Tax software?  I am getting extremely frustrated with the matter.

The estimated date of release is February 15, 2024. We recommend waiting until the day after, then updating TurboTax (if using Desktop), and run Review again. The hold on Schedule C should be resolved.

There is no notification sign-up for this update, but TurboTax does update each time you open the program. 

 

@jammer2000 

This issue is still not fixed.  Any update to when this might be fixed.

It's possible the changes in your refund total are influenced by more than your SEP contribution. Was this reported on Form W-2? That's where the known issue arose, but that has been resolved.

 

You might compare your 1040 each time you change the SEP contribution and check where the changes are made. If you're using TurboTax Online, you can see your 1040 following these instructions: How do I preview my 1040? In TurboTax for Desktop, use Forms Mode.

I am using the desktop version.  Everything is entered for my taxes except my Traditional SEP contribution.

 

When I enter an amount in SEP contribution, my refund goes down.  I am pretty sure there isn't a scenario where this should occur.  I have tried entering in forms mode and step by step mode and get the same result.

Strange. This might be a silly question but are you sure it’s not an amount owed that’s going down?

“I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

 

TurboTax Online:

 

1. Sign in to your online account.
2. Locate the Tax Tools on the left hand side of the screen. 
‌ 3. A dropdown will appear. Select  Tools. 
4. On the pop-up screen, select on“Share my file with my agent.” 
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token sanitized and transmitted to us.

 

TurboTax Desktop/Download 
Versions:
 

1. Open your return.
2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” 
3. This will generate a message that a diagnostic copy will be created.  
    Click on OK and the tax file will be sanitized and transmitted to us.
4. Please provide the token number that was generated in the response. 
 

 

 

TurboTax Desktop/Download 
Versions:

response.
 

 transmitted to us.

 

Token Number 1186584

Yes, I am positive.

Thank you for providing your token number.

 

Upon reviewing your file, it appears that when entering a greater SEP contribution, your refund amount goes up.  This is what we would expect to see. 

 

The amount you contribute to your SEP IRA is reported on your tax return as an adjustment to income. This deduction reduces your total income, which in turn reduces your taxable income for the year, thus increasing your refund amount due.

 

First, make sure that all updates have been run in your Turbotax program.  

 

Open TurboTax and select Check for Updates from the Online menu near the top. If there are any updates, you'll be prompted to download them.

 

• Use a wired, high-speed connection when updating, both to save time and minimize data corruption.
• If your connection drops in the middle of the update, try again; it should pick up where it left off.
• If you're having trouble updating on your PC, try a manual update.

If you find you need to manually update your TurboTax for Windows Software, here are some instructions to get started.

TurboTax 2023 Individual

If you're having trouble updating your TurboTax 2023 for Windows Individual software using the "Check for Updates" method, here are instructions for how you can get the latest federal program update:

 

1. Close TurboTax and all other programs except this browser window.
2. Select this link to download the 264 MB update.
3. Save the update file to your Windows desktop.
4. Double-click the update file w_perrelsuperpatch... on your desktop to install the manual update.

We don't offer manual updates for TurboTax state software. If you need to update your state, here are your options.

To properly enter your SEP contribution, make sure you've entered your self-employed income. This allows TurboTax to calculate the maximum amount you're allowed to contribute to your SEP IRA.

Once your self-employment income is entered:

1. Sign in to your TurboTax account.
2. Open your return.
3. Select Search and enter SEP IRA contributions (use this exact phrase, including the s on contributions).
4. Select the Jump to link in the search results.
5. On the Self-Employed Retirement Plans screen, answer Yes to Did you make a 2023 self-employed retirement plan contribution?
6. Depending on if you contributed, select Yes or No to the question Did you contribute to an Individual or Roth 401(k) plan?
   • If you get the message Self-Employed Retirement Plans are only for self-employed individuals (i.e., those filing Schedules, C, F, or K-1), this means that you haven't entered your self-employed income yet. Once you've entered your income, you can come back to these instructions.
7. On the next screen, select Yes to Do you want to make a contribution to a Keogh, SEP or SIMPLE retirement plan for 2023?
8. Answer any additional questions until you get to the Your Contributions screen, where you’ll be able to input your SEP IRA contributions.

If you are self-employed, you can contribute to a Simplified Employee Pension (SEP) IRA as much as the lesser of 25% of your net earnings or up to $66,000 for 2023, and your contributions may be tax-deductible as a business expense if you file and extension by April 15 and contribute before the October 16th extension ...Oct 16, 2023

 

Click here for information on entering SEP contributions into TurboTax.

 

Click here for end of year retirement tips.
 

This issue still persists.  When entering a traditional SEP contribution, refund goes down.  I did a fresh install of the software on another computer and opened my return only to get the same results.

Does TurboTax have actual support?  Instead if posting here and waiting days for a reply it would be nice to talk to somebody and get this resolved.

When you are logged into your TurboTax program you can click on the Live Tax Advice menu option to talk to a tax expert. Here is a link you can use to find help if you are using the desktop TurboTax program:   Turbo Tax Live Help

 

As far as your issue is concerned, the recommended steps to resolve it would be to look at your form 1040 before and after you enter your SEP contribution and see what numbers change. Then, investigate each area where there was a change to narrow down what is going on. 

 

One possibility is that you are not eligible for a SEP contribution so when you enter it it is not being deducted but you are subject to a penalty for an excess contribution to a retirement plan. Your SEP contribution would be limited to 25% of your wages from the business associated with the plan. There are also limits on how much you can contribute in total to retirement plans in a given year. 

 

I suggest you look at line 16 of schedule 1 to see if your SEP contribution is showing up on your tax return. Also look on line 8 of schedule 2 to see if there is an additional tax on IRA's or other tax-favored accounts.

 

To view your form 1040 and schedule 1 to 3:

 

1. Choose Tax Tools from your left menu bar in TurboTax Online
2. Choose Tools
3. Choose View Tax Summary
4. See the Preview my 1040 option in the left menu bar and click on it
5. Choose the Back option in the left menu bar when you are done 

I am using the desktop version, so the chat button is not available.  I did what you suggested, I entered $5,000 to traditional SEP and my taxable income went down but my tax due went up.

 

Something is wrong with the calculation regarding SEP.  My max SEP is roughly $50,000 so I am not exceeding those limits.

 

Getting extremely frustrated and should be refunded so I can use another tax service/software.

 

Don't they have a support line?  Its ridiculous.

To reach TurboTax support by telephone, Desktop users can visit this webpage for the number.

 

 

 

 

I get the impression that TT's strategy is to force users to pay for a solution to this question. The stock answer about entering "SEP IRA" in the search box and then "Jump to SEP IRA" no longer works. The calculation itself is simple enough; unless the rules for calculating this amount have changed there would have been no reason to rework the calculation.  Very frustrating at this point.

It turns out that if you are self-employed and contribute to Traditional IRA and then you make a contribution to a Traditional SEP and file married-filing-jointly and the joint income is over $143k, TT will not deduct your Traditional IRA contribution anymore, so that is why you see an increase in the amount of taxes you owe (or a decrease, if the sum is green). You need to dig through the forms in TT to see this. Based on some research online, this seems to be correct: you can't contribute to both Traditional SEP and IRA if the joint income is over $143k. So, pick one, or contribute in Roth. 

Yes, the SEP contribution is considered made by the employer and so deductibility is limited by that condition.