Can I purchase office equipment, such as a scanner, with my Solo 401k bank account? This would be used exclusively for the properties that I will purchase with the Solo 401k and not for any other personal purposes.
No, we would strongly urge against doing so.
While your intention may be to use this exclusively for your Solo 401k, the office equipment would be located in your home, making it likely that you or someone else in your household would use it for personal benefit, without even meaning to or without you knowing. This would create a prohibited transaction.
Required Minimum Distributions (RMDs) are the minimum amounts that must be withdrawn from your retirement accounts each year, once you reach a certain age.
You are responsible for taking your RMDs, withholding the taxes from your RMDs, and reporting your RMDs
These amounts will be included in your taxable income, except for parts, if any, that were after-tax or Roth
RMDs must be taken whether you are still active in the business or not
Where do I take RMDs from?
In general, RMDs must be taken from:
Your traditional IRA, SEP IRA, or SIMPLE IRAs
Your traditional account(s) within your employer-sponsored plans, such as your Solo 401k
Per the SECURE Act 2.0:
Your Roth IRAs and Roth 401ks, such as your Solo 401k Roth account(s), do not require minimum distributions, until after the death of the account owner
RMD rules do apply, however, to beneficiaries of your Roth IRAs and Roth 401ks
At what age do I start taking RMDs?
When you reach the age of 73:
Your first RMD must be taken by April 1st of the year following your 73rd birthday year
Subsequent RMDs (for each year after your first RMD) must by taken by December 31st
Note the following example from the IRS:
If you reach age 73 in 2024:
Your first RMD is due by April 1, 2025, based on your account balance on December 31, 2023, and
Your second RMD is due by December 31, 2025, based on your account balance on December 31, 2024.
How do I calculate my RMDs?
RMDs for your Solo 401k must be calculated separately from your IRAs
The following RMD calculator can be used as a general guide, but all totals should be confirmed with your CPA:
If I file Form 5500-EZ now, does that obligate me to file subsequent 5500-EZ forms for the following years even if the total plan assets are below 250k?
No. Form 5500-EZ is only required if the total plan value is $250,000 or above, as of the end of the plan year.
Filing the form is not required if the total plan value is below $250,000 as of the end of the plan year, even if the form has been filed for the previous year.
The IRS instructions for Form 5500-EZ note:
You do not have to file Form 5500-EZ for the 2025 plan year for a one-participant plan if the total of the plan's assets and the assets of all other one-participant plans maintained by the employer at the end of the 2025 plan year does not exceed $250,000, unless 2025 is the final plan year of the plan.
We are applying for a new mortgage and the lender would like to see a quarterly statement for our retirement accounts. Do you have anything prepared that I could plug my numbers into?
Note the following to properly complete the statement:
Download the file and save it on your hard drive
Open the file and edit the cells that are highlighted in yellow. Do not edit any other cells since the sheet includes formulas.
Insert your information
Refer to your Adoption Agreement document for any plan information
Account number is comprised of two numbers, connected by a "-": the plan number (which is listed on your Adoption Agreement and is usually 001) and the last 4 digits of your Social Security Number
Double-check your entered information for accuracy
Remove the yellow highlights and save the file
Save the file in PDF format. Do not send it in Excel format.
There are free software versions on the web which allow you to convert the file to PDF, if needed. You can then provide the PDF file to the person requesting the statement.
Terminating your Solo 401k plan includes the following steps:
Distribute all assets of your Solo 401k plan
Distributions may be taxable or non-taxable, depending on the type of distribution taken.
Formally request to terminate your Solo 401k plan
You must submit a request to us in writing for the termination of your Solo 401k plan.
We will issue a plan termination package to you
The plan termination package includes two documents which will be emailed to you- the Action by Board of Directors document and the Plan Termination package.
Sign the documents and keep them for your records
Since you are Plan Administrator, you are responsible for keeping all records related to the Solo 401k plan. This includes the termination documents.
Prepare the filing for the year in which the Solo 401k plan was terminated
If you are terminating your Solo 401k Plan this year, you will have to complete the following forms next year. Obtaining, completing, and submitting these forms are your responsibility.
Form 1099-R is required for both taxable distributions and non-taxable rollovers. This form must be distributed to the recipient of the distribution in January of the year following the distribution or rollover.
After the prohibited transaction has been identified, it must be corrected immediately, within the taxable year if possible.
Correcting the prohibited transaction means to undo the transaction to the extent possible and in any case to make good to the plan or affected account any loss resulting in the transaction, by restoring to the plan or affected account any profits made through the use of the plan assets. The plan must be placed in a financial position no worse than if the disqualified person had acted under the highest fiduciary standards (IRC Sec. 4975(f)(5) and ERISA Sec. 502(i)).
Under Internal Revenue Code a penalty tax is assessed equal to 15 percent of the amount involved in the prohibited transaction.
If the prohibited transaction is not corrected during the taxable year, then an additional penalty tax in the amount of 100 percent of the prohibited transaction amount will apply.
If you would like to perform a Roth conversion, please do the following:
Open a separate 401k account for the Roth funds, if you do not have one yet
From a banking standpoint, the Roth account is established in the same way as the pre-tax account, i.e. in the name of the 401k and using the EIN of the 401k.
The separate account is simply to keep the Roth funds separate from the pre-tax funds. Separate accounts are strongly recommended for ease of accounting.
Move the funds from the pre-tax 401k account to the Roth 401k account
This must be completed by the end of the year (e.g. December 31, 2025) to claim the Roth conversion for the year (e.g. 2025).
Complete the In-Plan Roth Conversion form, located in our Miscellaneous Forms section
The completed form is not given to anyone else; it will be kept in your file as part of your recordkeeping as Plan Administrator.
Report the Roth conversion through Form 1099-R
As Plan Administrator, you are responsible for the filing of Form 1099-R for your plan. The Roth conversion will be included as part of this year's taxable income.
You are not able to rollover pre-tax funds from your previous retirement account directly into the Roth account for your Solo 401k
For a Roth conversion, you must first rollover pre-tax funds into the pre-tax account of your Solo 401k. You can then perform the conversion and move the funds into the Roth account of your Solo 401k.
If you would like to convert property in your Solo 401k to Roth
Sign up and then make all your withholdings in the quarter in which you make a distribution. Taxes must be paid electronically.
Enroll as a "business" and use the name and EIN of the 401k
For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. The number can be used as a receipt or to trace the payment.
The taxes must be paid by the 15th of the month following the date of the Solo 401k distribution
If you do not withhold the mandatory 20% tax at the time of distribution, you would then pay the taxes with personal funds at the time of tax return. But again, 20% tax withholding is mandatory.
2. File Form 945 by January 31st to report and reconcile what you have withheld
See "Where To File" for information on how to file Form 945 electronically or via paper form. Only one Form 945 should be filed per year.
3. Report the distribution by issuing Form 1099-R from your plan
The 1099-R is filed in the year following the year in which the distribution was performed (e.g. the 1099-R for 2022 is filed in 2023).You are responsible for the filing of the 1099-R by both of its deadlines.
Department of Labor (DOL) Regulations 2510.3-3(c) state that Title I of ERISA does not cover plans for partners or a sole proprietor, such as a Solo 401k
While the Solo 401k is not technically covered under Title I of ERISA, the ERISA rules are still considered as a reference because the Solo 401k is a qualified plan.
Can the fee to set up the plan be counted as a plan expense and be paid for out of the plan?
Answer:
Generally, expenses incurred in connection with the establishment, termination and design of the plan relate to the employer's business activities and should not be paid by the plan. See DOL Advisory Opinion 2001-01A.
For example, if an employer has received a bill for attorney's fees related to a meeting to discuss whether a plan should be implemented and, if so, what type of plan should be established, that bill is a settlor expense and should not be paid by the plan that is established as a result of that meeting. However, once an employer decides to establish or terminate a plan, necessary administrative expenses incurred to implement and maintain the plan, or to complete the termination of the plan, could be paid from plan assets.
The following fees associated with the establishment of a plan are considered settlor fees and should not be paid with plan assets:
Fees for plan design proposals
Legal fees regarding corporate issues relating to the establishment of the plan