We are using TurboTax software. Under federal income, where it lists business deductions and credits, it has an amount that is basically the total net income from my wife's jewelry business…let’s say $5,000 for discussion purposes. In filling out the forms, we said that she wants to make a SEP IRA contribution, and it seems to be assuming that she will contribute that entire $5,000. But our understanding is she can only contribute 20% or $1,000. But schedule 1, line 16 shows the $5k amount. The only place we can see the $1k is on the Schedule C worksheet for qualified income deduction smart worksheet row 5e and we don’t need to submit that.
When we answer the questions about the SEP IRA, and we say we only want to contribute $1,000, it still says we can contribute up to another $4,000.
Last year, the number in the “business deductions and credits” section, it lists the actual amount she contributed to her SEP IRA, not her total net income as in this year. Maybe it’s a change in the tax law or the software but it still feels weird.
So bottom line is, just because she CAN contribute the full $5k, is that the right number to be on the form, or should it be the amount she wants to contribute?
I understand that this is outside any employer based retirement contributions.
You'll need to sign in or create an account to connect with an expert.
You can contribute up to 25% of your net earnings from self-employment to your SEP plan. I am not sure why TurboTax is allowing a larger contribution, but you should not contribute the $5,000 in your example. However, you may be able to augment your SEP contribution with an IRA contribution.
You can contribute up to 25% of your net earnings from self-employment to your SEP plan. I am not sure why TurboTax is allowing a larger contribution, but you should not contribute the $5,000 in your example. However, you may be able to augment your SEP contribution with an IRA contribution.
Thank you so much @ThomasM125 . Much appreciated. That is what we thought, but just wanted confirmation. My gut told me it's likely a bug. Fortunately, it doesn't affect taxes, but taken a face value, one could do something wrong. Cheers.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
DBecton
Level 2
Sagittarius09
Returning Member
Love0414
New Member
gafuller123
Level 1
kbda
Returning Member
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.