The IRS requirement to open and to continue with a self-directed solo 401k, which is a type of defined contribution plan for the owner-only businesses, is the performance of material services which results in self-employment income.
In the context of qualifying for opening a solo 401k through the mining of cryptocurrency, which is reported on Form 1099-NEC, the individual can open a solo 401k as long as she performs material services, the mining of the cryptocurrency is done outside of the retirement account, and treats the activity as earned income.
Various IRS forms or schedules are used to determine whether a self-employed person has net business income. Sole proprietors (one person owns all of the business) use Schedule C, Profit or Loss from Business.
Partnerships use Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc.
