SEP/IRA 2023 Contribution limits and TUrboTax not letting contribution to be made.

Forum|Forum|2 years ago
January 4, 2024
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For 2023 SEP/IRA limits are 25% of income or $66000 whichever is less. No limit on amount of income. TurboTax is not letting that happen and states that since our Adjusted gross income is $500,000 (From sale of our business) no contribution is available. BUT that is for IRA's and Roth's NOT SEP/IRA's. Help - is there a box that needs to be checked or unchecked for this to happen?

Best answer by dmertz

I assume that you are a sole proprietor or a partner in a partnership, otherwise the SEP contribution is reported on the business's tax return. A SEP contribution is entered in the self-employed retirement section of the business section of TurboTax. It is not to be entered anywhere under Deductions & Credits.

For a sole proprietor or partner, the limit for a SEP contribution is 20% of net earnings, not 25%. Net earnings are net profit from self-employment minus the deductible portion of self-employment taxes.

Anonymous_

Employee

I'll page @dmertz

dmertzAnswer

Employee

JimDimitriAuthor

According to the IRS website.

Contributions an employer can make to an employee's SEP-IRA cannot exceed the lesser of:

- 25% of the employee's compensation,

- or$66,000 for 2023 ($61,000 for 2022, $58,000 for 2021 and $57,000 for 2020)

Also, Annual compensation limit. You can't consider the part of an employee's compensation over $305,000 when fig- uring your contribution limit for that employee. However, $61,000 is the maximum contribution for an eligible em- ployee. These limits increase to $330,000 and $66,000, respectively, in 2023.

But that is okay BUT the software is not allowing the contribution to be made due to a MAGI of $500,000 which is from the sale of the business (Capital gains). I have adjusted numbers so that the 2 of us (Partners) get paid a 1099-NEC amount so we can make a SEP/IRA contribution. Software says NO!

dmertz

Employee

It seems that you have not understood my original reply. Nowhere in the business section of TurboTax where the self-employed retirement section for entering a SEP contribution is located will TurboTax make any mention of MAGI (except maybe in regard to a QBI deduction, but that has nothing to do with entering a SEP contribution).