My client has an increase in Sch C income for 2020. It appears that a SEP IRA contribution will help reduce tax due......
What is the "maximizing" the contribution option do and is there any reason not to maximize?
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It means the software will calculate the maximum allowed deduction.
Reason not to- client can't pay that much or doesn't want to.
Does the client have employees? If so, they will also have to contribute at the corresponding contribution rate for employees that qualify - at least 21yo, worked at least three of the five years for the business and received at least $600 in 2020.
If the return changes and it affects that qualification while you are working, it avoids over-contribution and avoids excess tax. Or, you hardcode how much they want to contribute.
"is there any reason not to maximize?"
When the client can't afford it.
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