HR Block, Keogh account related tax question

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
tapotti
Posts: 56
Joined: Thu Jun 02, 2011 8:37 pm

HR Block, Keogh account related tax question

Post by tapotti » Wed Feb 12, 2020 10:49 pm

This is a rather specific question, so hopefully there's someone here who really loves taxes and HR Block software :D .

Quick summary: I had an independent contractor side gig where I made $10,000. This is reported on a 1099. I have a Keogh account and want to make a profit-sharing contribution to this account. I can't make a regular contribution since I already maxed out a 401k at my main job. Anyways, my understanding is I can contribute 20% of my net profit (after subtracting FICA and business expenses) as a profit sharing contribution. Long story short, I contributed $1745 to my account.

How do I property report this contribution on HR Block?

Under the schedule C business expenses section, there's a box for "Pension and Profit sharing contributions". Do I enter the amount of $1745 there or leave it blank? It specifically states this is for employees. But if I'm a solo contractor, is it still valid?

Reason I ask is because under the Adjustments section, there's another section for Keogh, SEP, and Simple contributions. And it has a place to enter profit sharing contributions again. Do I enter $1745 there as well?

I know this is confusing, so I won't be surprised if there are not responses. Feel free to PM me!

leveraged
Posts: 12
Joined: Thu Mar 29, 2018 4:51 pm

Re: HR Block, Keogh account related tax question

Post by leveraged » Thu Feb 13, 2020 10:24 am

You enter it under the Adjustments section "Keogh, SEP, and SIMPLE Contributions". It should be output onto your return on your 1040 (Schedule 1, Line 15).

Schedule C is only for contributions you made to your employees, not counting yourself:
Enter your deduction for the contributions you made for the benefit of your employees to a pension, profit-sharing, or annuity plan (including SEP, SIMPLE, and SARSEP plans described in Pub. 560). If the plan included you as a self-employed person, enter the contributions made as an employer on your behalf on Schedule 1 (Form 1040 or 1040-SR), line 15, or Form 1040-NR, line 28, not on Schedule C.
(from IRS Schedule C instructions)

Topic Author
tapotti
Posts: 56
Joined: Thu Jun 02, 2011 8:37 pm

Re: HR Block, Keogh account related tax question

Post by tapotti » Thu Feb 13, 2020 10:44 am

Thanks! That's very helpful.

One more question: Based on the income of $10,000, I calculated my employer FICA tax component as $765. I had $513 in other business expenses.

How much can I contribute to my profit sharing? I had contributed $1745 but my software is saying I can contribute $3465. What is the deal? I thought you could contribute 25% of net earnings at most.

mcraepat9
Posts: 1512
Joined: Thu Jul 16, 2015 11:46 am

Re: HR Block, Keogh account related tax question

Post by mcraepat9 » Thu Feb 13, 2020 11:03 am

I use the Oblivous Investor's solo 401k calculator

https://obliviousinvestor.com/solo-401k ... alculator/
Amateur investors are not cool-headed logicians.

nolesrule
Posts: 1496
Joined: Thu Feb 26, 2015 10:59 am

Re: HR Block, Keogh account related tax question

Post by nolesrule » Thu Feb 13, 2020 11:24 am

tapotti wrote:
Thu Feb 13, 2020 10:44 am
Thanks! That's very helpful.

One more question: Based on the income of $10,000, I calculated my employer FICA tax component as $765. I had $513 in other business expenses.

How much can I contribute to my profit sharing? I had contributed $1745 but my software is saying I can contribute $3465. What is the deal? I thought you could contribute 25% of net earnings at most.
I don't think your employer-side FICA number is correct, because that's 7.65% of $10,000. It should be smaller, because it's based on your net self employment income (after expenses), not to mention there's a fudge factor so that you aren't paying FICA taxes on your FICA taxes.

I suggest you manually run through Schedule C and Schedule SE.

Additionally, is the software aware you maxed out your employee contributions already?

Post Reply