Just clarifying....

[bzorc]

Just for my clarification:

I have a client (a sole-proprietor, with no employees)whose Schedule C income is $218,000. What is the maximum SEP contribution that can be made for 2000? Is it $25,500 (15% of 170,000) or $22,174 (13.0435% of 170,000)?

Thanks for any replies.

[Michael Devault]

I vote for $22,174. Net earnings from self employment excludes a deduction for the self employed's SEP contribution. That's why the normal 15% contribution rate is reduced to 13.0435%.

[Guest mcdonnell]

I vote for $25,500. See Worksheet Example on Page 52 of Publication 590 and Worksheet Example on Page 18 of Publication 560.

[Michael Devault]

Since this isn't a presidential election, I want to change my vote to $25,500 after reviewing the worksheet to which mcdonnell refers.