Who is the Custodian of My Solo 401k?

QUESTION: Who is the custodian for my Solo 401k now? Does your company serve as the custodian of my Solo 401k?

ANSWER: No we do not serve as the custodian of your Solo 401k but rather as the Solo 401k provider. The custodian of your Solo 401k depends on whether the funds are liquid or invested in alternative investments such as real estate and tax liens, for example. If the funds are liquid, the bank that you opened the Solo 401k bank account at is the custodian of the non invested funds. On the other hand, if the Solo 401k funds are invested in real estate, you are the custodian of the real estate documents, such as the recorded deed. As the trustee of the Solo 401k, you are responsible for safekeeping the real estate assets of the Solo 401k. Read More »

Year-end Solo 401(k) Contribution Questions | C-Corporation Solo 401k

I was successful and presenting your Solo 401k trust establishment documents to my banker at Chase Bank and opened the Solo 401k bank account with Chase. Thank you for your Wells Fargo contact information. I may still end up at Wells Fargo if my relationship with Chase changes at some point.  Chase cleared everything through their legal department and got on board with your instructions so everything worked as planned. I made my initial Solo 401k contribution of $1,500.00 to fund my new Solo 401k plan.

QUESTION: I have a couple of questions related to year-end tax planning. It is my understanding that I can do an employer contribution up until the date of filing my tax return and the employer contribution will act as a reduction in self-employed income and not be subject to self-employment tax since my self-employed business is a C-corporation.  Is that correct?  I am planning on doing an employer contribution of $42,000.  I have the self-employment income to more than cover the $42,000.

ANSWER: Because your business type is a C-Corporation, both of your Solo 401k contribution types (employee and employer) will be based on W-2 income generated from your self-employed business.

Visit Solo 401k contribution calculator to determine your maximum contribution for the tax year.

Please also visit calculating Solo 401k contribution for a Corporation for detailed instructions. Read More »

Multiple Solo 401k contribution Sources

QUESTION: I have a quick question.  I’m operating a C Corp small business, but I expect to receive income from multiple sources such as other employers.

Should I consider setting up my Solo 401k as a sole proprietor under
my own name, so that all income sources can be used for plan

Thanks, JP

ANSWER: As detailed in IRS Publication 560, “you can make contributions on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business for which the plan was set. “  As such, if you have multiple businesses from which you generate self-employment income, it might be wise to setup a separate Solo 401k planfor each.  Note that the 401k rules permit the self-employed to participate in multiple 401k plans; however, the annual contribution limit applies to all 401k plans that the self-employed individual is participating in.

Lastly, the Solo 401k rules prohibit contributions of income earned from your full-time employer unless you are an independent contractor receiving 1099 income, which would afford you option to open a Solo 401k plan.

Solo 401k Roth Question

Good morning,

I had one question about my scenario. I have about $25,000K in my employer 401K, which can be rolled over to a self-directed Solo 401k plan. As per our discussion yesterday, this money can be rolled over to my Solo 401k (pretax) plan and later be converted to Roth Solo 401k (paying tax on the amount converted).

My question:
1) can I keep this 25,000 in my Solo 401k (pretax) account and invest?
2) Should I pay your company extra for having both pretax and post tax account?

Thank you in advance. LK Read More »

Are Assets held in the name of the Solo 401k?

QUESTION: I’m self-employed and my business legal form is a C-corporation. After I adopt the Solo 401k by the 12/31 deadline, and then begin to invest my Solo 401k plan in real estate and trust deeds, are the assets held in my C-corporation name or in the Solo 401k providers name?



ANSWER: Pursuant to IRC 401(a)(1), the Solo 401k plan assets must be held in trust. A trust is a legal entity that is separate from your business and you as the Solo 401k plan trustee/participant.  Therefore, when investing your Solo 401k plan in real estate and trust deeds, as well as any other investment, they must be registered in the name of the Solo 401k plan instead of your name or self-employed business name or Solo 401k providersname.

Lastly, the Solo 401k plan is administered by you as the trustee and are, therefore, responsible for maintaining, safeguarding and investing the Solo 401k funds.  This is known as the exclusive benefit rule because it prohibits the business owner from diverting the Solo 401k plan assets for his own benefit.

Solo 401k Plan Funding Contribution Question

QUESTION: Can I open a bank account for my self-directed Solo 401k account by making a regular deposit (transferring funds from the SEP may take a while)? If so, up to how much can I deposit in the new account?

Thank you kindly


ANSWER: Yes you can fund your new Solo 401k by making an annual Solo 401k contribution and wait to transfer your SEP IRA next year, as there is no time restriction in directly transferring a SEP IRA a Solo 401k plan.

If your self-employed business type is a corporation, the contribution is based on your W-2 income. The maximum contribution amount for 2012 tax year is $50,000 plus an additional $5,500 if you are 50 years or older.

You can use our Solo 401k contribution calculator to calculate your maximum Solo 401k contribution amount.

Further, when making the Solo 401k contribution, make the check payable in the name of the Solo 401k and write “Solo 401k Annual Contribution” on the memo section of the check.  You may also use our Solo 401k contribution form which is located on our forms tab to document the Solo 401k contribution.

Women May Want to Look to 401k Small Business Financing to Start Their Franchise

Women May Want to Look to 401k Small Business Financing to Start Their Franchise.

Are you a woman thinking of starting a business? Hesitant to enter a sector of the economy traditionally seen as male dominated?  Actually, be inspired by your fellow female entrepreneurs, for between 1997 and 2007, the number of women-owned businesses grew by 44% (versus 22 percent for men), twice as fast as male-owned businesses!  According to the research, women are investing highly in education and healthcare businesses. Franchise opportunities like Curves a health and fitness company and Kumon a franchised educational program offering children tutoring and enrichment, are predominantly owned and operated by women!   According to Amy Millman, the executive director of the National Women’s Business Council, more and more women are being encouraged to found their own Internet start-ups and other technology companies instead of trying to break through the male-dominated executive management in technology firms. Read More »

Conversion to Roth Solo 401k and Cutoff Questions

QUESTION: If I contribute to my 2012 non-Roth Solo 401k contribution employer profit sharing after Dec 31 but by April 15 and also convert it to Roth by April 15, do I pay the tax for rollover to Roth for 2012?

ANSWER:  A Solo 401k in plan rollovers is taxed in the year of conversion and included in gross income. As such, if you proceed with making a profit sharing contribution to the Solo 401k bank account holding your pretax funds for tax year 2012 by 12/31/2012 and then convert the profit sharing contribution to a Solo 401k Roth by April 15, 2013 (technically referred to as an in-plan rollover), the total amount converted will be included in your gross income for tax year 2013. Read More »

Solo 401k year-end reporting question

QUESTION: Can you tell me what kind of reporting I might have to do at year-end on the existence and value of my Solo 401k, either as an individual or reporting my sole-member LLC for which my Solo 401k is the only member?

By the way, everything has been going great so far…

Thanks again,


ANSWER: Because you transferred your Self-Directed IRA LLC from the prior custodian to your new Solo 401k plan, the self-directed IRA custodian will issue Form 1099-R and report the in-kind transfer of your Self-Directed IRA LLC to your new Solo 401k as a direct rollover using code “G” and will mail copy to you in January and to the IRS by March. As such, with respect to year-end Solo 401k reporting, this is the only reporting with respect to the IRS or any other Solo 401k regulator provided you haven’t processed any distributions from your Solo 401k plan.

However, annual informational reporting Form 5500-EZ will need to be filed with the IRS by July 30 of next year if the total fair market value of your Solo 401k was $250,000 or more as of 12/31.  We send our clients an e-mail at the beginning of each July to remind them of the required Form 5500 EZ filing and ask a few questions before we prepare and file Form 5500 EZ with the IRS which is included in our annual Solo 401k fee.

12-12-12 Solo 401k Plan opening Questions

QUESTION: Any particular banks in NYC or Westchester that have been used without a problem for setting up the Solo 401k bank account?

ANSWER: While the Solo 401k bank account can be opened at any bank or credit union, we do have clients who have opened their Solo 401k bank account at Wells Fargo Bank branches located in NYC and Westchester NY.

QUESTION: Also can the Solo 401k bank account be opened after the rollover as I’m away from NY until the end of the year?

ANSWER: Yes the Solo 401k establishment rules require that the Solo 401k documents be executed by 12/31 in order to qualify to make Solo 401k contributions by your tax return due date plus extension. Therefore, the Solo 401k brokerage or bank account can be opened next year.
Read More »

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