1040-US: Keogh deduction still present when an overall loss from self-employment income exists

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Question

The taxpayer has a Schedule C with income, a Schedule F with a loss, and has an overall loss from self-employment income. Why is the Schedule C with the Keogh plan still getting a Keogh deduction?

Answer

As long as the trade or business under which the plan was established has net earnings (compensation), you can make contributions. In this case, the Schedule C had net earnings so a Keogh deduction was calculated. The tax application uses the net earnings from the activity identified in the Form and Unit fields in Screen Keogh for purposes of Keogh / SEP calculations. To adjust the amount the tax application uses, enter an adjustment amount in the Adjustment to earned income field in Screen Keogh. Negative entries are treated as subtractions.

Related topic: Keogh, SEP, and SIMPLE contributions FAQs (1040)

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