1040-US: Calculation of modified adjusted gross income when there are KEOGH, SEP, or SIMPLE adjustments on the return

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Question

How does modified adjusted gross income calculate when there are KEOGH, SEP, or SIMPLE adjustments on the return?

Answer

The tax application calculates modified adjusted gross income (MAGI) by combining all amounts used to figure adjusted gross income (AGI), except for certain items. Per Form 8582 instructions, among those items is the deduction allowed under section 219 from contributions to IRAs and certain other qualified plans.

Per IRC 219(b)(2) there is a special rule for employer contributions under simplified employee pensions. This section does not apply to an employer contribution to a simplified employee pension. There is a similar special rule for simple plans.

IRS Publication 925 Passive Activity and At-Risk Rules, MAGI for this purpose is your AGI figured without deductible contributions to IRAs and section 501 I (18) pension plans. Section 501 I (18) is a tax-exempt organization's plan and allowed under section 219.

Based upon this information, the tax application does not add back KEOGH, SEP, or SIMPLE adjustments.

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

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