Question

IRA contributions

Forum|Forum|4 years ago
March 23, 2022
1 reply
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I am preparing my son's taxes. His only income is 1099-NEC. When I include an IRA contribution, the system in increasing his Federal Taxes due.

ColeenD3

He can only make a contribution for the amount of money he made on his business. The maximum contribution is $6,000 in 2021.

Being self-employed, he has to also deduct one-half of self-employment tax from the amount he can contribute. For a $6,000 contribution on $6,000 of income, that amount is $$5576. If he contributed more, he over contributed.

Also, make sure he entered his 1099-NEC in the right place.

H

HWKPAuthor

He did some filing work for my employer, and was given a 1099-NEC rather than a 1099-MISC. He made over $4000 and was contributing $2000 to an IRA. We indicated he was not an employee, but did this work as occasional activity (which is true).

M

MinhT1

Your son is considered as self-employed and his income is earned income and qualifies him for an IRA contribution.

When you enter his Traditional IRA contribution, his Federal tax due should decrease.

In TurboTax, you can enter IRA contributions by following these steps:

In TurboTax, open your tax return
Click on Federal in the left-hand column, then on Deductions & Credits on top of the screen
Scroll down to All Tax breaks, locate the section Retirement and Investments and click on Show more
Click Start next to Traditional and Roth IRA Contributions.