TT is way over-estimating my Max. allowable 2023 SEP contribution

[sshultz]

When choosing the Auto_maximimze option for determining my max. 2023 SEP contribution TT reports a value that is twice the amount of allowable max contribution value I get using formulas from other websites (and even TT's own description of the calculation.  I am find using my own calculation for filing my taxes (about 18% to 19% of self-employment income) but I am worried that maybe this TT error is occurring because something else is wrong with my return (like my self-employment income is entered twice) even though in the process of the calculation they confirm what my SE income is.. It would also be good for TT to be aware of possible bug in their program as this could create major problems for filers (over contributing).  The only possible explanations that I have for it is that TT is doubling my max allowable SEP contribution because I am filing jointly with my wife (even though the SE income is mine alone) or maybe because TT does not explicitly know that my main employer (not SE) offers me a 403b and 457b retirement plan.

[AliciaP1]

Your SEP retirement contribution maximum for 2022 is $61,000 or 25% of your income from self-employment whichever is less.  Your (other) employer 403b and 457b plans have different annual limits and do not affect your SEP contribution.

Per the IRS:

Although plans may set lower deferral limits, the most you can contribute to a plan under tax law rules is the lesser of:

• the allowed amount for that plan type for the year, or
• 100% of your eligible compensation defined by plan terms (includible compensation for 403(b) and 457(b) plans).

If you’re self-employed, generally your compensation is your net earnings from self-employment

[sshultz]

Yes thats correct, but the problem is that the turbo tax internal max. calculation tool is saying I can make a max. SEP contribution that is 39% of my my SEP income. Its clearly wrong and would lead to serious IRS penalties and taxes. Before TT runs the max contribution calculation it prompts me to confirm my total SEP income so that is not the problem.  I suspect something is wrong with the internal turbo tax calculations which is scary.  TT should have a feature where they give the filer the option to see how did the math on such calculations (sort of like seeing the IRS calculation worksheets).

[AliciaP1]

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@sshultz 

[sshultz]

token # # 1119329

TT is way over-calculating my 2022 allowable SEP Keogh contribution

[AliciaP1]

Upon review, your TurboTax file has over $65k in self-employment income on 2 Schedule Cs with no expenses reported to reduce the income on either one.  Your maximum allowable contribution after deducting 1/2 of self-employment tax and applying the self-employed reduced rate of 20%, is $13,241 against a maximum limit of $61,000.  This is a 20% contribution not 39%.

If you want to reduce your self-employment income by allowable expenses see What self-employed expenses can I deduct?

@sshultz