The Schedule C Client Who Owes $18,000: A SEP Contribution Conversation Script for Tax Season

The moment the conversation happens

It is late March. A client who drives for a delivery platform, runs a one-person consulting shop, or does contract nursing sits across from you with a completed Schedule C showing $95,000 of net profit. You have just told them they owe roughly $18,000 between income tax and self-employment tax, and they are asking whether there is anything they can still do.

There is, and it is the single most valuable conversation most preparers have with a self-employed client all year. A SEP IRA can still be opened and funded for the prior year up to the return due date including extensions. The client can cut their bill today and start building an account that, in a few years, becomes the base for a Solo 401(k) or a bigger plan. The script below is written to be delivered in about five minutes, and it stays inside the tax lane. The Gigaverse CPA program exists to give that client somewhere to go afterward.

The script

Open with the number they care about. "Before we file, there is one deduction still available to you. You can put money into a SEP IRA for last year, right up to the filing deadline, and every dollar you put in comes off your taxable income. Based on your numbers, you can put in up to about $17,600."

Show the math once, plainly. "Here is how that works. Your net profit was $95,000. Self-employment tax on that is about $13,400, and you get to deduct half of it, about $6,700, before we compute the SEP limit. That leaves about $88,300. Your SEP limit is roughly 20 percent of that, which is about $17,600."

Translate into a tax saving. "At your bracket, a $17,600 contribution saves you roughly $3,900 in federal income tax, plus whatever your state adds. It does not reduce your self-employment tax; that is computed before the SEP deduction. So your bill drops from around $18,000 to around $14,000, and you own the $17,600 instead of sending $3,900 to the Treasury."

Name the trade-off. "The money has to stay in the account until you are 59 and a half, or you pay a 10 percent penalty plus tax on early withdrawals, with some exceptions. If you do not have $17,600 sitting in a bank account, you can put in less, or we can extend the return and you can fund it over the summer."

Set the deadline. "If we file by April 15, the SEP has to be funded by April 15. If we extend, you have until October 15. Either way, the account has to exist before you can fund it, and opening one takes a day or two."

Point to next year. "For this year, if your income is similar, you have a better option than a SEP. A Solo 401(k) lets you put in $24,500 as the employee plus the same roughly 20 percent as the employer, up to $72,000 total for 2026, or $80,000 if you are 50 or older. The catch is that the employee part has to be elected by December 31. So the plan should be set up this fall, not next March."

Hand off. "I am not an investment adviser, so I will not tell you what to invest in. What I can do is give you the numbers and point you to a tool that tracks them through the year so we are not doing this at the last minute again."

The worked numbers behind the script

For a preparer who wants to check the arithmetic before using it:

• •Net Schedule C profit: $95,000
• •Net earnings subject to SE tax: $95,000 x 0.9235 = $87,733
• •SE tax at 15.3 percent: about $13,423
• •Deductible half of SE tax: about $6,712
• •Adjusted earnings for SEP: $95,000 minus $6,712 = $88,288
• •SEP limit at the Schedule C effective rate: 0.20 x $88,288 = about $17,658

The 20 percent is a shortcut for the 25 percent rate applied after the contribution itself is deducted. The exact rate is 25 divided by 125, which is 20 percent. For a client whose business is an S corporation paying W-2 wages, use 25 percent of W-2 compensation instead, and the SE-tax adjustment does not apply.

If the client is 50 or older, note that the SEP has no catch-up provision. The $80,000 figure applies to a Solo 401(k) only.

Variations for common client profiles

The client with almost no cash. Suggest a partial contribution now and an extension. Extending the return does not extend the time to pay tax, so estimate the reduced liability and have them pay that by April 15, then fund the rest of the SEP by October.

The client who also has a W-2 job with a 401(k). The SEP limit is unaffected by 401(k) deferrals at the day job, because the SEP is an employer contribution from a different employer. If they later adopt a Solo 401(k), the $24,500 deferral limit is shared across all their 401(k)s, but the employer contribution is not.

The client who wants Roth treatment. A SEP can accept Roth contributions under SECURE 2.0, but custodian support is still uneven. The simpler path is a deductible SEP now plus a $7,500 Roth IRA if income allows, and a Roth Solo 401(k) deferral election next year.

The lower-income client. If net profit is under about $35,000 single or $71,000 joint, mention that starting January 1, 2027 the federal Saver's Match pays up to $1,000 into a non-Roth IRA for qualifying contributions, including Roth contributions. The mechanics are summarized on Gigaverse's Saver's Match Roth rule page.

The driver. If mileage is the largest deduction, make sure the 2026 rates are split correctly: $0.725 per mile for January through June and $0.76 for July through December. Mileage reduces net profit and therefore reduces the SEP limit; do not compute the limit before the log is finalized.

Staying inside the lines

Two rules govern what a CPA can accept for steering the client to a specific app afterward.

Under AICPA ET §1.520, a member may not accept a commission or referral fee for recommending a product to a client for whom the firm performs attest services during the period of the engagement. For all other clients, any commission or referral fee must be disclosed to the client, and most state boards require the disclosure in writing before or at the time of the recommendation. A share of subscription revenue is a commission for this purpose; disclose it exactly as you would any other.

Gigaverse structures partner compensation so the disclosure is easy to write truthfully. It pays CPAs a share of revenue on paid app subscriptions or a flat per-seat licence, and it never pays per account opened, per deposit, or as a percentage of assets. Payments tied to accounts or deposits would look like transaction-based compensation under Exchange Act Section 15(a) and FINRA Rule 2040, and an SEC-registered adviser cannot share advisory fees with an unregistered party. Those constraints, and the disclosure text, are on the how we make money page.

The client can run the same numbers you just showed them with the free Gigaverse tools, which is a useful way to confirm the figures match before you file.

Where Gigaverse fits

Gigaverse is a subscription retirement app for people with 1099 income. Today it offers a Roth IRA through a FINRA/SIPC-member broker-dealer; and applications for a SEP IRA and a Solo 401(k) are open at gigaverse.ai/sep-ira and gigaverse.ai/solo-401k, reviewed by a person rather than opened instantly in the app. It also computes the limits, tracks contributions and mileage through the year, and hands a clean summary back to the preparer. It is pursuing SEC RIA registration and does not guarantee returns. CPA partners are paid only a share of subscription revenue or a flat per-seat licence and receive a §1.520-ready disclosure. Program details are on the CPA partner page.