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Why does line 1 under SEP-IRA Keogh on the SE Plan Wkt show a percentage of 20% instead of 25% when using SureFire

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🧾 IRS Basis (Pub 560)

Per Pub 560 on pg. 15: Deduction Limit for Self-Employed Individuals

If you make contributions for yourself, you need to make a special computation to figure your maximum deduction for these contributions.

Compensation is your net earnings from self-employment, defined in chapter 1. This definition takes into account both the following items:

• The deduction for the deductible part of your self-employment tax.
• The deduction for contributions on your behalf to the plan.

The deduction for your own contributions and your net earnings depend on each other.

For this reason, you determine the deduction for your own contributions indirectly by reducing the contribution rate called for in your plan.

🧮 How SureFire Determines the Rate

Step 1: Use the Self-Employed Rate Tools

Use this when you need to apply the IRS rate computation for self-employed individuals.

To do this, use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed in chapter 6.

Step 2: Calculate Your Maximum Deduction

Use this when you need to compute the final maximum deduction amount.

Then, figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 6.

Tags: federal,form