Published by AE Tax Advisors Team • 2026-06-24

Missing Retirement Deductions Recovered -- $28,000 Over Two Years

The Client

Grant Phillips, a self-employed financial planner in Kansas City, Missouri, earned $195,000 in net business income. He had established a SEP-IRA three years ago but his prior tax preparer had only deducted $6,000 per year in contributions -- the traditional IRA limit -- rather than the full SEP-IRA limit of 25% of net self-employment income.

The Problem

For two consecutive years, Grant was entitled to SEP-IRA deductions of approximately $36,250 per year (25% of adjusted net self-employment income) but only claimed $6,000 each year. The missed deduction of $30,250 per year over two years totaled $60,500 in unclaimed retirement deductions.

Our Strategy

We verified that Grant had actually contributed the full amounts to his SEP-IRA (he had been making contributions based on his financial advisor's guidance, not his tax preparer's). We then amended both years' returns to claim the correct SEP-IRA deduction, properly calculating the deduction based on net self-employment income after the SE tax deduction.

The Results

The two amended returns recovered $28,000 in overpaid federal and state taxes by properly claiming the SEP-IRA deductions. Grant now contributes and deducts the maximum each year, and we also recommended he evaluate a defined benefit plan for even larger contributions given his income level and age.

Key Takeaway

Self-employed individuals with SEP-IRAs or Solo 401(k) plans should verify their tax returns reflect the full contribution limits -- not just the basic IRA limit. The difference between a $6,000 and a $36,000+ deduction compounds dramatically over time.