Potential Error on the 2023 Deduction Worksheet for Self-Employed (Pub. 560, pg 35)?

Okay so I'm trying to finish my taxes for last year and I'm stuck on this Self-Employed deduction worksheet in Publication 560, page 35. I'm looking at line 17 and something seems really off. I've been doing my own taxes for about 5 years now since I started my photography business, but this is the first year I'm really trying to maximize my retirement contributions. I made around $68,000 in net profit last year. When I'm filling out line 17 on the worksheet, it says to enter a specific amount, but then the calculation doesn't seem to make sense with what's on line 16. Am I missing something obvious here? The instructions say to carry over a number but it doesn't align with what I calculated above. Has anyone else noticed this? Is there something wrong with the worksheet or am I just totally misunderstanding how to complete this section? I'm nervous about making a mistake on my retirement deductions since this is a significant part of my tax planning.

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19 comments

StarStrider

•8M

You're actually raising a good point. I work with self-employed clients regularly, and that worksheet in Publication 560 can be confusing, especially around line 17. What's happening is that line 17 is carrying over a calculation from previous lines, but the instructions don't make it super clear how they connect. The worksheet is designed to help you calculate your maximum deductible contribution based on your self-employment income, taking into account the deduction itself (it's a circular calculation). Double-check that you're using the correct percentages based on your retirement plan type (SEP IRA vs Solo 401k have different limits). Also make sure you're accounting for any adjustments to your net earnings from self-employment.

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StarStrider

•8M

For SEP IRAs, the limit is 25% of your net earnings from self-employment, but there's an adjustment you need to make first. The actual calculation ends up being closer to 20% of your net profit due to the circular calculation. For Solo 401(k)s, you can contribute as both employer and employee. The employer portion uses a similar calculation to the SEP (about 20% of net profit), but you can also make employee contributions up to $22,500 for 2023 (plus catch-up contributions if you're over 50). That's why the numbers might not be matching what you expect.

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Sofia Torres

•8M

I had the exact same issue last year and spent hours trying to figure out what was wrong. Turns out I was overthinking it! I discovered taxr.ai (https://taxr.ai) after a friend recommended it when I was pulling my hair out over these self-employment tax forms. I uploaded the worksheet and my filled-out numbers, and it immediately spotted what I was doing wrong - I was using the wrong percentage for the calculation because I misunderstood which type of plan the worksheet was calculating for. The tool actually walked me through the exact calculation step by step, explaining how line 17 connects to the previous lines. Saved me from potentially making a $4,000 mistake on my contribution limits!

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Sofia Torres

•8M

Yes, it actually specializes in analyzing tax forms and worksheets - that's why it was so helpful for this specific Publication 560 issue. You upload your document or even a photo of your worksheet, and it analyzes the specific form structure and numbers. It definitely works with all the self-employment related forms - I've used it for Schedule C calculations, SE, and even some of the more obscure business expense worksheets. The system is updated with all the 2023 (and now 2024) tax information, which was crucial because some of the limits and percentages change year to year.

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Ava Martinez

•8M

I was really skeptical about using an AI tool for my taxes as I mentioned above, but I figured I'd try taxr.ai since I was completely stuck on the same worksheet problem. Wow, I was wrong to doubt it! The system immediately identified that I was mixing up the rate calculations between lines 16 and 17. The tool showed me exactly how the circular calculation works - basically, line 17 requires you to account for the fact that your retirement contribution itself reduces the self-employment income it's based on. That's why the percentage seems "off" compared to what you might expect. Honestly saved me hours of frustration and probably an incorrect filing. Going to use it for my quarterly estimated payments calculations too.

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Miguel Ramos

•8M

If you're still having trouble figuring out the worksheet, another option is to actually speak with the IRS directly about this. I know, I know - everyone says it's impossible to get through to them, but I found a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in under 25 minutes when I was completely stuck on a similar self-employment retirement issue. They have this system that navigates all the IRS phone menus and holds your place in line, then calls you back when an agent is about to answer. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent I spoke with actually walked me through the exact calculation for the retirement deduction worksheet and confirmed there was a typo in one of the older versions of the publication.

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Miguel Ramos

•8M

It's not a special access number, they use technology to navigate the phone system and wait on hold for you. Basically, they call the IRS, go through all the menu options based on your situation, and then wait in the queue. When an agent is about to pick up, their system calls you and connects you directly to that agent. You don't have to sit through all the hold music and waiting. I was skeptical too, but it definitely isn't BS. The IRS phone lines are absolutely a nightmare, but that's exactly why this service exists. They don't skip the line or anything shady - they just handle the waiting part for you so you don't have to burn hours of your day. When I used it, I waited about 3 hours total, but I was only on the phone for the last 20 minutes with the actual agent.

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Zainab Omar

•8M

I need to apologize for my skeptical comment earlier. After struggling for another week trying to get through to the IRS about this same self-employment deduction worksheet issue, I broke down and tried Claimyr. I'm still shocked it actually worked. Got connected to an IRS agent who confirmed there is indeed a confusing element to line 17 on that worksheet. The agent explained that this is a common source of questions because the reduction calculation seems counterintuitive. For anyone else with this problem: the percentage on line 17 is intentionally lower than the standard 25% because it's accounting for the circular calculation of the deduction. Saved myself from making a $7,000 mistake on my retirement contributions. And only spent 15 minutes actually talking to the IRS instead of days trying to get through.

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Connor Gallagher

•8M

I think I can explain what's happening with line 17 in simpler terms. The confusion comes from the circular calculation problem. When you make retirement contributions as self-employed, those contributions are themselves a deduction that lowers your SE income. But your maximum contribution is based on that income! So there's a chicken-and-egg problem. The worksheet solves this by using an adjusted percentage. Instead of the straightforward 25% that most people expect, line 17 uses a reduced percentage (about 20%) that accounts for this circular relationship. That's why the number seems "wrong" but is actually correct.

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Connor Gallagher

•8M

Yes, the circular calculation applies to both SEP IRAs and Solo 401k employer contributions. For both plans, the employer contribution limit is 25% of your net self-employment earnings, but the actual calculation works out to roughly 20% of your net profit. The big difference is that with a Solo 401k, you can also make employee contributions up to $22,500 for 2023 ($23,000 for 2024) that aren't affected by this calculation. That's why Solo 401ks often allow for higher total contributions, especially for people with moderate self-employment income.

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