According to Turbotax (and I assume the IRS and other tax programs) I calculate the Keogh from the self-employment income from the Schedule SE net profit/less. However, the SEP is calculated from the next line which is the net profit/loss * 92.35%. Why is this?Thanks
To exclude from you amount eligible for Keohg AGI adjustment the 1/2 AGI deduction you get from SE taxes. The combined percent for FICA and medicare is 15.3. This divided by 2 is 7.65. 1 minus 7.65% = 92.35%. This is a bit confusing, and doesn't work when earnings are above the threshold amount when you are not longer liable for FICA but still have to pay medicare, which has no ceiling. It's safer to use 1/2 SE taxes for the adjustment. I know this is a bit confusing, but then, we are talking about Federal Income taxes. I hope this helps.
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