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SEP Contributions Schedule C Business

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Schedule C businesses never have wages or designated pay or whatever you want to call it..or shouldn't; as discussed elsewhere on this board, it happens sometimes but it's not "right."

A sole proprietor's compensation is the Schedule C bottom line profit...with some adjustments; most notably, you have to reduce that number by 1/2 of the self-employment tax, and then you have to factor in the contribution itself.  So, for a maximum SEP contribution of 25% of pay, if your net after subtracting 1/2 SE tax is $100K, the max contribution is $20K (100-20=80 and 25% of 80 is 20).

Ed Snyder

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