1040-US: Maximum allowable SIMPLE plans deduction

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Question

How do I calculate the maximum allowable SIMPLE plans deduction?

Answer

Depending on whether the plan is a SIMPLE 401(k) or a SIMPLE IRA, enter the appropriate code in the Compute maximum allowable contribution field in Screen Keogh as follows.

Simple 401K

Enter 3 to calculate the maximum allowable SIMPLE 401(k) deduction. Contributions are limited to net self-employment earnings reported on Schedule SE or $12,500. UltraTax CS includes an employer-matching contribution of up to 3 percent (.03) of net self-employment earnings when calculating the maximum SIMPLE contribution.

Simple IRA

Enter 5 to calculate the maximum allowable SIMPLE IRA deduction. The maximum allowable deduction is limited the same as a SIMPLE 401(k), except that there is no limitation on compensation. The maximum allowable SIMPLE IRA deduction is $25,000 (excluding catch-up contributions).

Note: To understand how a deduction is calculated, press CTRL+F in Screen Keogh to view the Keogh/SEP/SIMPLE Worksheet.

In lieu of calculating the maximum allowable contribution, use the Total contributions to SIMPLE 401(k) plan or Total contributions to SIMPLE IRA field to enter known contributions to the plan. The same limitations apply for purposes of calculating the SIMPLE plan deduction.

Also, if the SIMPLE plan participant qualifies to make catch-up contributions, mark the Include catch-up contribution in computing maximum allowable contribution field in Screen Keogh. With this field marked, UltraTax CS automatically calculates the maximum allowable catch-up contribution (if the participant is age 50 by the end of the calendar year) in addition to the elective SIMPLE plan contribution. Catch-up contributions for all eligible SIMPLE plans are limited to $3,000 for 2018.

To adjust the amount of self-employment earnings UltraTax CS uses to calculate the self-employment deduction, enter an adjustment 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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