SEP IRA

Forum|Forum|5 years ago
March 26, 2021
2 replies
10 views

Why does my federal and state tax increase if contributing to a SEP IRA?

TurboTax Home & Biz Windows

ThomasM125

Level 15

I'm not sure why this would happen, as a contribution to a SEP IRA would normally reduce your taxable income. One possibility is that you owe money rather than are getting a refund, but you are miss-reading the refund meter. If so, you might be looking at a tax due thinking it is a refund, so when you add the IRA contribution, the tax due decreases, so you think your refund decreased in error.

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macuser_22

Alumni - Champ

A SEP IRA is NOT a Traditional IRA and does not get entered in the IRA contributions interview if that is where you put it. That would add an excess contribution penalty and your tax will go up.

It it either entered in box 12 on your W-2 if you are an employee or in the self-employed (schedule C) sections under self employed retirement plans.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**