Plan contributions for a self-employed individual are deducted on Form 1040, Schedule 1 (on the line for self-employed SEP, SIMPLE, and qualified plans) and not on the Schedule C. See the contribution limits for your plan.Ī limit applies to the amount of annual compensation you can take into account for determining retirement plan contributions. Total limits on plan contributions depend in part on your plan type.
You can use the Table and Worksheets for the Self-Employed (Publication 560) to find the reduced plan contribution rate to calculate the plan contribution and deduction for yourself. One way to do this is to use a reduced plan contribution rate.
Note that your plan compensation and the amount of your own plan contribution/deduction depend on each other - to compute one, you need the other (this is a circular calculation). You use your plan compensation to calculate the amount of your own contribution/deduction. the amount of your own (not your employees’) retirement plan contribution from your Form 1040 return, Schedule 1, on the line for self-employed SEP, SIMPLE, and qualified plans.the deductible portion of your SE tax from your Form 1040 return, Schedule 1, on the line for deductible part of self-employment tax, and.To calculate your plan compensation, you reduce your net earnings from self-employment by: Plan compensation for a self-employed individual However, you must make adjustments to your net earnings from self-employment to arrive at the amount of "plan compensation" to use to determine the plan contribution/deduction for yourself. You calculate self-employment (SE) tax using the amount of your net earnings from self-employment and following the instructions on Schedule SE, Self-Employment Tax. You can't simply multiply your net profit on Schedule C by 10%. This formula works to determine employees' allocations, but your own contributions are more complicated. For example, you might decide to contribute 10% of each participant's compensation to your SEP plan. Retirement plan contributions are often calculated based on participant compensation. Click the Convert button to have UltraTax CS convert the entity type to a 1065 return.Ĭonverting a 1065 return to an 1120S returnĬomplete the following steps to convert a 1065 return to an 1120S return.If you are self-employed (a sole proprietor or a working partner in a partnership or limited liability company), you must use a special rule to calculate retirement plan contributions for yourself.To save a copy of the original tax return with a new client ID, mark the Save a backup copy of the original client using this client ID checkbox and enter the backup client ID in the adjacent field.
UltraTax CS enables you to change a 1065 client's tax return to an 1120S return or vice versa.