An IRA including a self-directed IRA LLC (aka checkbook IRA) held at a self-directed IRA custodian such as Kingdom Trust may be rolled over to a self-directed solo 401k.
While the preferred method of moving any IRA to a solo 401k is via a direct rollover instead of a 60- day rollover, some IRA custodians including Kingdom Trust may end up processing the IRA distribution as a 60-day rollover if you request the distribution prior to the establishment of the solo 401k plan.
What is a DIRECT-ROLLOVER?
A direct rollover is not subject to the 60-day rule.
This is the preferred method of moving an IRA LLC held at Kingdom Trust or any other self-directed IRA custodian to a self-directed solo 401k.
A direct rollover occurs when assets such as an LLC are moved directly from the self-directed IRA to a Solo 401k. Kingdom Trust is then required to directly assign the IRA LLC to the solo 401k.
After processing the IRA LLC direct rollover, Kingdom Trust will then report the movement of the IRA LLC to the solo 401k as a non-taxable direct rollover using Code “G” on Form 1099-R.
What is a 60-Day ROLLOVER?
If the IRA LLC is distributed/assigned directly to you from the Kingdom Trust IRA, Kingdom Trust will prepare an assignment to assign the LLC in your PERSONAL NAME. You then have 60 days from the date of taking constructive receipt of the LLC assignment to deposit/assign the LLC to the solo 401k plan.
Kingdom Trust will then ( as the releasing IRA custodian) report the IRA LLC as a distribution on Form 1099-R using either code “1”-early distribution if you are under age 59 1/2 or code “7”-normal distribution if you are age 59 1/2 or older.
In addition to timely depositing/assigning the LLC to the solo 401k plan, the onus will then fall on you to properly report the 60-day on your Form 1040 so that is it not deemed a taxable IRA distribution.
60-Day IRA LLC Distributed by Kingdome Trust Reporting on Form 1040
- Entire distribution amount goes on line 4a of Form 1040.
- Enter 0 in box 4b of Form 1040 since you deposited/assigned the LLC to the solo 401k. Remember to write “rollover” next to the amount.
If Kingdom Trust processes the movement of the IRA LLC as a 60-day rollover, see the following:
- Since Kingdom Trust distributed the IRA LLC to your personal name, you have 60 days from the date that you received the IRA LLC assignment to deposit the LLC to your solo 401k.
- An additional assignment will then need to be prepared to assign the LLC from your name to the solo 401k.
- Once the LLC has been assigned/deposited to the solo 401k, you can then (1) continue with the LLC as it will now list the solo 401k as the member instead of the IRA, or (2) deposit the funds from the LLC to the solo 401k account.
- If you choose to close the LLC, you will then dissolve the LLC with the secretary of state.
- You will receive a Form 1099-R from Forge Trust in January of February of following year which they will issue to reflect the IRA distribution.
- You will then report the IRA 60 day rollover to the solo 401k on your Form 1040 that will be due to the IRS in April.