Entering SEP, SIMPLE and qualified plan contributions in Lacerte

Follow these steps to enter or change a plan contribution rate for SEP, SIMPLE or qualified plans:

1. Go to Screen 24, Adjustments to Income.
2. Scroll to the SEP, SIMPLE, Qualified Plans section.
3. Enter the applicable fields to indicate the maximum:
   • Profit-sharing (25%/1.25) (1=maximum)
   • Money purchase (25%/1.25) (1=maximum)
   • Defined benefit (no limitations)
   • Self-Employed SEP (25%/1.25) (1=maximum)

Enter the desired rate in the Plan Contribution rate (.xxxx) [O] field.

Please refer to this resource for information about each input.

Commonly asked questions about SEP, SIMPLE and qualified plans:

How do I enter SEP and Qualified Plan contributions?

First, go to the SEP, SIMPLE, Qualified Plans section on Screen 24, Adjustments to Income.

Enter your client’s qualified payments in the applicable field for their plan type:

• Profit-sharing (25%/1.25) (1=maximum),
• Money purchase (25%/1.25) (1=maximum), or 
• Self-employed SEP (25%/1.25) (1=maximum).

Enter the amount of payments, or enter a 1 to calculate the maximum deductible payment. By default, the program limits these deductions to the lesser of 20% of compensation or the maximum contribution limit in IRS Pub. 560.

Defined benefit (no limitations): Since there’s no limit on defined benefit plans, you’ll need to enter the actual amount. The program will print your entry on Schedule 1, line 15, with the letters “DB”. Enter the amount as a negative number if you want to suppress the “DB” from printing.

If your client participated in a solo 401(k), enter the amount of:

• Total SE elective deferrals (except Roth) (1=maximum), and/or
• Total designated Roth contributions (1=maximum).

Enter the amount your client contributed, or enter a 1 to calculate the maximum deductible amount (for elective deferrals) or allowable amount (for Roth contributions).

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How do I enter SIMPLE contributions?

The following fields for SIMPLE contributions can be found under SEP, SIMPLE, Qualified Plans in the SIMPLE subsection on Screen 24, Adjustments to Income.

• Self-employed SIMPLE (1=maximum) - Enter an amount of SIMPLE contribution, or enter 1 to calculate the maximum SIMPLE contribution or $11,500 ($14,000 if age 50 or older). The program limits the deduction to net earnings from self-employment.  If the taxpayer or spouse has elective deferrals from a W-2, the program limits the SIMPLE contribution to the excess of the maximum elective deferral amount over the elective deferrals entered with the W-2.
• 1=nonelective contributions (2%) - The program defaults to employer matching contributions. Enter 1 to have the program apply a 2% non-elective contribution. The program multiplies 2% by the lesser of $245,000 or net earnings from self-employment.

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Using letter fields and adjusting SE earnings

The fields under the Letter Use Only subsection allow you to enter data that affects what prints on the client letter, without altering amounts in the tax return.

• Contributions/withdrawals due date [O] - Enter the date by which the taxpayer or spouse must make contributions to (or withdrawals from) a qualified retirement plan, SEP, or SIMPLE to override the date that prints on the client letter.
• Net earnings [A] - By default, the program calculates net earnings for qualified plan, SEP, and SIMPLE purposes based on net earnings from Schedule SE, less the self-employment tax deduction. To adjust the net earnings amount for qualified plan and SEP purposes for the taxpayer or spouse, enter the amount of the adjustment.   An entry in this field adjusts line 1 of the SEP/Qualified Plan worksheet, or line 1 of the SIMPLE worksheet. An input field is also provided in the Schedule C, Schedule F, Partnership, S Corporation, Other Income, and Contracts and Straddles input sections allowing you to exclude self-employment earnings of certain activities from the SE retirement wage base.
  • Amounts entered in these input fields adjust the automatic calculation of net earnings for qualified plan and SEP purposes only.  If net earnings are negative, the program uses entries in these fields as the net wage base (e.g., the program adds a positive entry to zero instead of adding it to the net loss).

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How does the program calculate the maximum deduction?

Lacerte will calculate the maximum deduction based on the rate on the SEP, SIMPLE, Qualified Plans worksheet.

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How do I troubleshoot diagnostic ref. 3420 taxpayer's SEP deduction was disallowed?

1. Go to Screen 24, Adjustments.
2. Scroll down to the SEP, SIMPLE, Qualified Plans section.
3. Make sure the entry in Self-employed SEP (25%/1.25) (1=maximum) is entered under the correct Taxpayer or Spouse column.
4. Check to ensure that the self-employment income has flowed to the desired form.

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How are SEP contributions maximized with multiple Schedule Cs handled by the program?

When multiple Schedule C activities have been entered in Screen 16, Business Income, and the maximum contribution has been indicated in Screen 24, Adjustments to Income, Lacerte will include income from both activities when calculating the deduction on Form 1040, line 28.

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Refer to Pub 560 for more information about SEP, SIMPLE and qualified plan contributions.