TT Online Isn't Correctly Reflecting Earned Income for IRA Deduction

[variableresults]

I have W2 and small business income for my 2025 return, along with $7000 of IRA contributions, $3250 of which are to a Traditional and the rest to a Roth. I have those documents loaded and the $7000 reflected. 

However, TT keeps telling me I'm going to have to pay the 6% penalty, because my income is zero. This is not correct. It seems to be taking my negative small business income, which is more than my W2 income, and thinking that my earned income is zero. 

This is not correct according to the IRS--590-A (2025) clearly states that small business lossses do not count against earned income. 

Self-employment loss.

"If you have a net loss from self-employment, don’t subtract the loss from your salaries or wages when figuring your total compensation."

TT Online is doing the opposite here, though, and I need this corrected so I can file without making the IRS think I went over my contribution limit. I would do it directly on the form, but that's not available in the Online version. Expert help has not be helpful at all, and honestly seems to have no idea what to do. 

[VolvoGirl]

All I can think of is….are you married?   Make sure the W2s are assigned to the right spouse.   Maybe delete the W2 and enter them again Manually.  

[variableresults]

Nope, single. 

[DaveF1006]

Yes, you are correct. IRS--590-A (2025) clearly states that small business losses do not count against earned income. Sometimes, the internal worksheet that calculates "Earned Income" gets stuck on the business' loss.

1. Go to Tax Tools > Tools > Delete a Form. 
2. Find the IRA Contribution Worksheet (it might be labeled IRA Contrib Wks).
3. Delete it. This clears the "Zero Income" flag.
4. Go to Federal > Wages & Income.
5. Ensure your W-2 is the very first thing listed and that the "Owner" of the W-2 matches the "Owner" of the IRA contribution exactly (e.g., if you are Taxpayer 1 on the W-2, you must be Taxpayer 1 for the IRA). 

If this doesn't work, try this.

1. Go to your Schedule C section and temporarily change an expense so that your net profit is $0 instead of a negative number. 
2. Go to the IRA Contribution section. TurboTax should now see your W-2 income, realize you have $7,000+ in compensation, and stop the 6% penalty.
3. Crucial: Once the "Penalty" warning is gone, go back to Schedule C and change your expense back to the correct amount.

For most situations, the “Contribution Limit” check only occurs once. After it’s met, the penalty usually won’t show up again if the loss is restored.

If you are covered by a retirement plan at your W-2 job (Box 13 "Retirement Plan" is checked), TurboTax might be confusing your Deduction Limit with your Contribution Limit. Even if you can't deduct the Traditional IRA contribution due to income/loss, you are still allowed to make the contribution as "Nondeductible" without a penalty.

Make sure you tell the program you want to keep the contribution as Nondeductible rather than withdrawing it, if this is the case.