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Contribution to SEP with loss on Schedule C Income?


Guest AFRICA6796
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Guest AFRICA6796

I am showing a loss on my schedule C income ( line 12 of my 1040). However, for my overall 1040- I have earnings. Can I make a SEP IRA contribution ?

In other words, is a sole proprietor required to have a net profit in order to be eligible to make a contribution to a SEP IRA

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My interpretation of the discussion in IRS Pub 590 is that, if you're self employed, you must have positive earnings from self employment in order to contribute to a SEP.

The limit on contributions is 15% of compensation. For the self employed, compensation is defined as net earnings from self employment. If net earnings is zero, so is compensation. Thus, the maximum contribution is 15% of zero.

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Guest AFRICA6796

Thanks ,

That's what I thought.

Would believe that my CPA filed my taxes, showed a loss and still included a SEP IRA contribution?

He insisted that my understanding of the regs is incorrect- and to complicate matters I e-filed.

Good thing I double checked-at least I can file an amended return

Thanks again

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