Adopted 401(a) profit sharing plan as sole proprietor. IRS says 1. no deduction if there is a loss 2. should be reported as SEP on 1040 line 28 instead of Sch C and 3. advance contributions are subject to 10% penalty. Help! I see they are wrong on various "summary" overviews but sure could use a code section. Thanks

1. I agree
2. line 28 is correct for the owner's amount. Schedule C is for any employee contributions
3. I assume you mean a penalty for nondeductible contributions, which is correct if 1 is accurate.

Thank you. 1q. So if the $25,000 becomes income or "profit" on line 31 Sch C and then 1040 line 12, doesn't it wash with the $25,000 credit on line 28? 2q. I set it up as a 401(a) profit sharing plan for limits and timing of contributions. 3q. If the tax return is on extension and the contribution/deposit is made in June and declared for the prior tax year can't another contribution/deposit be made in the same year for the current calander/tax year? Thanks again.

If your only profit is the $25,000, then your $25,000 will exceed the deduction limit because it is more than 25% of compensation.

..or 20% of your modified net profit when you are unincorporated

Thank you. Can advance contributions be made? Is the timing of the contribution deposit still the due date of the return including extensions?

Thank you.

The deadline for the contribution deposit is still the due date of the return, including extensions. You may make contributions before the deadline. But there are excise taxes and other problems if you contribute in advance of the plan year for which the contribution is made.