1040-US: Deduction for self-employment tax on Keogh, 401(K) and SEP Plan Contribution Worksheet does not match deduction on Form 1040

Show expandable text

New (tax) year, new help!

Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.

Question

In the Keogh, 401(K) and SEP Plan Contribution Worksheet, why doesn't the deduction for self-employment tax in Step 2 match the deduction for self-employment tax reported on Form 1040, Schedule 1, line 27?

Answer

The Keogh, 401(K) and SEP Plan Contribution Worksheet calculates on a per-activity basis. Therefore when more than one self-employment activity is present on the return, Step 2 of the worksheet reflects only the portion of the deduction for self-employment tax that is directly allocable to the activity under which the retirement plan is established.

For example, if a taxpayer has a Schedule C with $10,000 of net profit and a Schedule F with net profit of $20,000, and has a retirement plan established for the Schedule C activity, only one-third of the deduction for self-employment tax reported on Form 1040, Schedule 1, line 27, is reported in Step 2 on the associated Keogh, 401(K) and SEP Plan Contributions Worksheet.

Was this article helpful?

Thank you for the feedback!