Self-Directed Solo 401k Common Questions

A Self-Directed Solo 401k Plan With Checkbook Control is a powerful tax and investment tool that can be used only by  those with self-employment income and no full-time employees. It is a Qualified Retirement Plan, or One-Participant 401(k) QRP, covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) QRP, but doesn’t need to perform nondiscrimination testing for the plan, since there are no employees who could have received disparate benefits. This exemption from non-discrimination testing empowers you to maximize the incredible strategies available to QRPs for your financial benefit. Following are common questions and answers regarding SoloK eligibility, benefits, and operations.

What is Self-Directed Solo 401k Plan With Checkbook Control?

A Self-Directed Solo 401k, referred to by the IRS as a One-Participant 401(k) Plan, is a traditional 401(k) plan covering a business owner and partners (if any) with no full-time employees. Spouses of business owners can also be covered by a Solo 401(k) if they receive compensation from the sponsoring business. Such 401(k) plans can be designed to include many attractive tax and investment features that are not provided in plans covering full-time employees other than the business owners and spouses.

What are the benefits of a Checkbook Control Self-Directed Solo 401k?

A Solo 401k offers small business owners the greatest tax benefits and investment options of available retirement plans. It is far superior to a SEP-IRA in every aspect. Self-Directed Solo 401k plans can be invested in real estate, private loans, tax deeds, and many other assets.

Individual 401k Plans, another term for Solo Ks, can provide tax benefits of up to $120,000 per year, depending on age and marital status. That’s in addition to tax-free growth on investments held by the plan.

What type of contributions can be made to a Checkbook Control Solo 401k?

Solo 401k contributions come from two sources: (1) employee contributions and (2) employer profit sharing contributions. Solo 401k Employee contributions can be pre-tax, Roth, or after-tax contributions.

Are There Any Required IRS Tax Filings For A Self-Directed Solo 401k?

There are no annual filings required until plan assets reach $250,000, at which time Form 5500-EZ must be filed with the IRS each year. You can file it yourself or have us prepare it for you.

Taking a distribution, in-plan conversions, and UBTI may require filing of Forms 1099-R or 990-T, which we can assist with. Read more about filing requirements for Solo 401(k)s here.

Is there a deadline by which my Self-Directed Solo 401k must be established?

A Solo 401(k) can be established at any time. However,  to make tax-deductible contributions for a particular tax year, the plan must be established by December 31 of that year. Contributions do not have to be made by then, nor does the Solo 401k bank or investment account need to be established by then, but the Solo 401k plan documents must be signed by that date.

Is there a deadline by which contributions must be made to a Self-Directed Solo K?

Contribution must be made by the tax-filing due date of the business entity, including extensions if timely filed for, as outlined in IRS Publication 560.

Can I rollover retirement funds from other accounts to my Checkbook Solo 401k?

Traditional IRAs, SEP-IRAs, Thrift Savings Plan (TSP), 457(b) plans, 401(k) and profit-sharing plan funds can be rolled over to a Solo 401k. Roth IRAs cannot be rolled over to a Solo 401k.

SIMPLE-IRAs can only be rolled over after 2 years of participation in the SIMPLE Plan. In addition, an employer sponsoring a SIMPLE-IRA may not sponsor any other plan.

A Self-Directed Solo 401(k) Plan with Checkbook Control is the premiere tax-favored investment vehicle for those that have self-employment income and no full-time employees. Use it to invest in real estate, private loans, ETFs, mutual funds, precious metals and coins, cryptocurrency, crowdfunded investments, litigation finance (lit-fin), merchant cash advance (MCA), cannabis & marijuana, private companies, tax certificates (liens & deeds), and nearly any other investment that you choose.