Correcting a prohibited transaction
Under Internal Revenue Code a penalty tax is assessed equal to 15 percent of the amount involved in the prohibited transaction. After the prohibited transaction has been identified, it must be corrected immediately – certainly within the taxable year. However, if the prohibited transaction is not corrected during the taxable year, then an additional penalty […]
What if I want to hire employee(s) in the future?
I know the Solo 401k is only for self-employment businesses without employees (other than the owner). What if I want to hire employee(s) in the future? Answer: The Solo 401k plan is an Owner-Only plan. You cannot set up a Solo 401k/ Owner-Only plan if you have full-time employees or long-term part-time employees (Long-term part-time […]
Direct vs. indirect rollover
Should I do a direct or indirect rollover into my Solo 401k? Answer: Direct rollovers are strongly recommended for funding your Solo 401k. Direct rollovers are non-taxable events. The payment is made directly from one retirement plan to another. While indirect rollovers may be possible, they are not recommended since they can lead to an […]
Charitable donation from my 401k
Is it possible to make a charitable donation from my 401k to a church or another non-profit without tax-consequences? Answer: If you plan to include retirement assets in a charitable donation, you should consider how it may affect your finances. In some cases, it can be more beneficial to designate the charity of your choice […]
Filing a 1099 for a contractor working on a property owned by my 401k
Do I need to get a tax ID from a contractor working on a property in my 401k so that I can file and submit 1099 to the IRS? Answer: According to the IRS if you pay independent contractors, you have to file Form 1099-MISC, Miscellaneous Income, to report payments for services performed for your […]
Can I set up a Solo 401k bank account at an international bank?
Answer: Yes, the Solo 401k trust can have a bank account at an international bank.
What happens when my spouse stops working for my business?
Answer: If you and your spouse work in your business together and your spouse stops working in the business, (s)he can still participate in the plan in terms of directing their existing assets in the plan. Your spouse has all the rights of the participant except the ability to make contributions into the plan. Your […]
Performing a Roth conversion
IMPORTANT: Please speak with your CPA prior to performing a Roth conversion in order to understand the tax consequences. This is a taxable event. For more information on Roth conversions, review our Knowledge Base articles. If you would like to perform a Roth conversion, please do the following: From a banking standpoint, the Roth account is […]
Can my wife transfer her 401k from a former employer to my Solo 401k plan?
Answer: No, she cannot rollover her retirement funds into your account. All retirement accounts are individual and tied to a Social Security Number, so she would not be able to rollover her IRA or 401k into your individual account. (The only exception would be upon death). However, your wife can participate in your Solo 401k if she […]
Loan interest payments as tax deductions
When repaying the Participant Loan, can the interest portion of the payments be used for tax deductions? Answer: No, I don’t believe that interest payments on the participant loan can be deducted on your tax return, unless the loan is used to purchase a primary residence. We are not qualified to provide tax advice and […]