QRP & Solo 401k Contribution Deadlines
Note: 401k Plan documents are due for complete restatement. Please be sure to read the info about this by scrolling to the bottom of this page.
Checkbook Solo 401K and Checkbook SEP-IRA Contribution Deadline. The deadline for contributions to Self-Directed Solo 401(k) Plans and Self-Directed SEP-IRAs is the tax return due date of the business sponsoring the plan, including extensions.
- The contribution deadlines depend on the type of business that sponsored the plan – sole proprietorship, partnership, S-corporation, C-corporation, or LLC taxed as any of the foregoing – and whether you timely file for a tax return filing extension.
- Filing extensions are especially helpful for those that want to make 2021 contributions, but don’t yet have funds available to do so by the initial required filing date. Continue reading “Checkbook Solo 401k-QRP: 2021 Year End Maintenance”
Self-directed QRP, Solo 401k, & SDIRA investors that use tax-sheltered retirement accounts to invest in real estate, private lending, crypto, tax liens, syndications and additional alternatives need to know about regulatory changes affecting their accounts. In this post, we’ll outline details of the SECURE Act impacting self-directed investors using QRPs, Solo 401(k), & SDIRA to invest off Wall Street. Continue reading “SECURE Act For QRP, Solo 401k, & SDIRA Investors”
A Self-Directed Solo 401k With Checkbook Contro
l is a powerful tax planning tool, providing $10,000’s – up to $122,000 of annual tax deductions. Since the passing of tax reform in 2017, the Checkbook 401k has become even more important, as a key tool for maximizing Section 199A Qualified Business Income 20% tax-deductions
. For key 2018 year-end tax strategy and tips, listen to Commercial Real Estate Pro Network Show Episode 172: Solo 401K with Bernard Reisz
and J Darrin Gross. Continue reading “Podcast: Solo 401k 2018 Year End Tax Strategy & FAQ”
QRPs & Checkbook Self-Directed Solo 401k Plans
, also known as Checkbook QRPs
, provide a powerful feature that can be leveraged in so many ways: A Checkbook QRP & Solo 401k Loan
QRP Loan Proceeds can be used to finance anything you’d like and the interest payments are made to yourself in the form additional deposits to your tax-sheltered QRP. Think of it as a QRP line of credit, requiring no bank underwriting, credit checks, or paperwork processing. (Caveat: Of course, it’s NOT truly a “line of credit” and that calling it a line of credit can be misleading. More on that below.)
Checkbook 401k Loan Interest Payments can be viewed as a way to make backdoor contributions – beyond the Solo 401k contribution limits – to your Checkbook Solo 401k tax advantaged retirement accounts. Once those interest payments are paid to your Solo 401(k) plan or QRP, those funds become additional plan assets that can be invested tax-free.
- Do you have debt to pay off?
- Do you want to purchase a new vehicle?
- Pay for education?
- Or, would you like to make an investment outside your QRP or Solo 401k?
The Checkbook Control QRP & 401k loan feature is your best option and in this post will cover all that you need to know to legally take advantage of this Checkbook QRP feature. Continue reading “QRP & Solo 401k Plan Loan: FAQ & Answers”
What is a Roth Solo 401k Plan? What is a Solo 401k Plan?
Understanding Roth Solo 401(k)s requires that we first understand the basics of traditional Solo 401k plans.
401K Plans, creatively named after Section 401(K) of the Tax Code, are Defined Contribution qualified retirement plans that allow employees to choose (“elective deferral”) to contribute all or part of their compensation to a tax-advantaged account and exclude the amounts contributed from current taxable income. The tax code calls this a “cash or deferred arrangement,” or CODA. A 401k Plan can be combined with other types of plans, such as Defined Benefit and Cash Balance Plans, to maximize tax deductions and allow for multiple forms of plan contributions. The typical 401(k) Plan provides for employer profit sharing contributions, in addition to employee contributions. Self-Directed Solo 401(k) Plans are 401(k) plans for businesses that don’t have full-time employees other than business owners and their spouses, which can be designed to include very attractive features such as Roth 401k Contributions and After-Tax Employee Contributions.
What is a Roth Solo 401k Plan?
Continue reading “Solo 401K Roth Contribution Q&A”
A Self-Directed Solo 401k Plan With Checkbook Contro
l 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. Continue reading “Self-Directed Solo 401k Common Questions”
In this post you’ll learn how to use a QRP, 401k, or Solo 401k to get up to $120,000 into Roth retirement accounts (Mega Roth
), annually. If you don’t already know the value and power of that – this is a must read. If you already know and appreciate the value of tax-sheltered & tax-free Roth retirement accounts, this post is a must-read. Continue reading “Mega Backdoor Roth ReSure Checkbook 401k vs. Checkbook IRA”
I’ve got a pal who whose got a great gig going. It’s a “side-business” that nets him about $120K a year. Prime candidate for an Individual K
. He’s got lots of discretionary income to invest
and needs to reduce his current taxable income
. At his job (read: W-2) he gets to invest his 401k
in loaded mutual funds to which he’s been reducing his contributions as he increases his allocation to real-estate and other alternatives
Sounds like a great candidate for a Checkbook Control Solo 401K! Between him and his spouse they could sock away tens of thousands of dollars in their Solo K and invest tax free in real estate (remember no UDFI on leveraged real-estate in a 401k!). BUT, NOT SO FAST. Here’s the catch, my buddy’s W-2 comes from his Dad’s company, which has several hundred people on payroll and the IRS has got a tool known as the Controlled Group Rules which result in ownership of businesses being attributed to relatives for tax purposes. This could potentially make a child’s Qualified Retirement Plan – QRP – subject to anti-discrimination testing based on their parent’s employees, making them ineligible for a Solo 401k – intended for an owner-only business, with no employees.
To resolve this matter, Congress provided a handy reference known as the Internal Revenue Code (IRC). The Internal Revenue Code defines family relationships in several places…so we’ve got to interpret the conflicting definitions and determine which of those apply. (Hint: It depends…)
[If “con” is the opposite of “pro,” what is the opposite of “progress?”….answer at the end of the post:)] Continue reading “Solo 401K Eligibility: Are Parents and Children Related? Controlled Groups”
Checkbook QRP, self-directed Solo 401k
and checkbook-control IRA
investors are aware (I hope that’s true) of the Prohibited Transaction Rules and Disqualified Persons
discussed in IRC 4975
. So, if you’re familiar with IRC 4975 are you covered? Or, do you need to know more than that to stay in compliance and protect your assets?
The Plan Asset Rule
There’s a lesser known extension of IRC 4975 in the Code of Federal Regulations that discusses something known as the Plan Asset Rule. In a nutshell, the Plan Asset Rule says that when retirement plans own a “significant” share of an entity, all of that entity’s assets are treated as assets of the retirement plans for purposes of the prohibited transaction rules.
The implications of this can be staggering; if retirement plans collectively own a significant portion of an entity, all the disqualified persons of all the retirement plan investors are disqualified persons to that entity. Continue reading “Beyond Prohibited Transactions: The Plan Asset Rule”
Among the first concepts introduced to self-directed IRA and Solo 401(k) investors are “prohibited transactions” and “disqualified persons.” While those are certainly key concepts, there several others to be aware of; among those is the “Exclusive Benefit Rule.” Continue reading “Beyond Prohibited Transactions: The Exclusive Benefit Rule”
Benefiting from tax-advantaged retirement funds before retirement age would be a beautiful thing, especially for those of that leverage the power of Solo 401(k)s and Checkbook IRAs. But, as that would defeat the intent of those accounts, the Prohibited Transaction Rules of IRC 4975 were created. Although written broadly, the innovative investor can contrive many ways to circumvent those rules.
However, beyond the letter of the law, the IRS has some additional tools at its disposal with which to counter creative strategies. Those include the Step Transaction Doctrine, the Exclusive Benefit Rule, and the Plan Asset Rule. For cases in which those rules may not apply, the IRS has the Department of Labor Interpretive Bulletin ERISA IB 75-2. Continue reading “Beyond Prohibited Transactions: The DOL Interpretive Bulletin”