Funding Solo 401k | Solo 401k Contribution Reporting | Solo 401k Distribution Reporting

QUESTION: I’m talking with my local credit union to see if they can open solo 401k bank accounts.  Can you also let me know about the Well Fargo bank account for Solo 401k that you mentioned?

ANSWER: Wells Fargo can setup checking account for your Solo 401k after you provide them with the Solo 401k documents prepared by your Solo 401k provider.

Also a couple of funding questions:

1) QUESTION:  We will take our transfer forms into our current SEP IRA custodian and have them issue a check in the name of the Trust.  Then we plan to use that check to open the trust checking account.  Do we need any record keeping for the balance at the end of our current SEP IRA and the start of Solo 401K?

ANSWER:  The SEP IRA to Solo 401k transfer will be reported as described below by the releasing SEP IRA custodian as well as you as the Trustee of the self-directed Solo 401k.

Reporting by releasing SEP IRA custodian: The amount transferred from SEP IRA to the self-directed Solo 401k account will be reported by the releasing SEP IRA custodian on Form 1099-R in box 1-Gross distribution and  box 7-distribuiton codes, line using code “G”.  By using code G, the movement of funds from SEP IRA to Solo 401k will treated as a direct rollover which is nontaxable but reportable to the IRS. The releasing SEP IRA custodian will then file copy of form 1099-R with the IRS and mail copy to you by the end of January to file with your personal tax return-Form 1040. Again, the SEP IRA to Solo 401k direct rollover is not taxable, only reportable.

Reporting of SEP IRA direct rollover to Solo 401k plan:

  • Entire SEP IRA direct rollover distribution amount goes on line 15a if you file Form 1040
  • 0 goes in line 15b if you file Form 1040 since you deposited SEP IRA direct roll over funds in Solo 401k plan’s checking account. Make sure to write “rollover” next to the amount.
  • File copy of Form 1099-R issued by releasing SEP IRA custodian with your personal tax return.

2) QUESTION: Then we plan to make 2012 contributions to our new Solo 401k.  Is it as simple as depositing money into the Solo 401k trust checking account?  Then, do we need to send any record keeping to you for year-end balance?

ANSWER: The 2012 Solo 401k can be made in 2012 or in 2013 by your tax return due date plus extensions since you executed the Solo 401k trust documents before the December 31, 2012 solo 401k opening deadline.  Please use our Solo 401k contribution form found under the forms tab of our website to document your Solo 401k contributions. Here’s the link:https://www.mysolo401k.net/Free-Solo-401k-Investment-Forms.html

Further make the Solo 401k contribution check out in the name of the Solo 401k and write “Solo 401k contribution” on the memo section of the check and then mail, walk it in or deposit the check(s) at the local bank ATM machine.  As the trustee of the Solo 401k, keep copy of the Solo 401k contribution form(s) in your possession. You can also e-mail of fax copy of Solo 401k contribution form to My Solo401k as your Solo 401k provider, but it’s not necessary as My Solo 401k will only need to know the current balance of your self-directed Solo 401k once Form 5500-EZ has to be filed with the IRS, usually once the Solo 401k balance exceeds $250,000 in total value.

3) QUESTION: How do we get year-end info from you, like 1099, etc. to be used to report our 401k contributions and balance on tax returns?

ANSWER:

With respect to Solo 401k distributions, Form 1099-R is only issued when you make taxable distribution from your Solo 401k, usually at retirement. Please read following blog from our website surrounding distributions and reporting, which would be handled by My Solo 401k after you fill-out Solo 401k distribution form as the distribution must be documented. My Solo 401k would obtain distribution figure and then prepare and file Form 1099-R with the IRS and mail copy to you.

With respect to Solo 401k contributions, as the trustee of the Solo 401k plan, you will report contribution on your tax return (e.g. Form 1040, Form 1120 or form 1120S) Visit Solo 401k distributions to learn where and which tax return is used to report Solo 401k contributions.

With respect to annual Form 5500-EZ reporting, this information return is with the IRS by the end of each July and must only be filed once the entire Solo 401k plan account balance exceeds $250,000 as of 12/31 of prior year, and/or at Solo 401k plan termination. My Solo 401k will file this return and thus will e-mail you beginning of June each year to obtain information necessary to file Form 5500-EZ by the end of July deadline. Please visit Solo 401k Form 5500-EZ to learn more about Form 5500-EZ reporting.

4) QUESTION: In the list of mysolo401k.net services… there are several listed as “optional” for Solo 401k reporting etc.  How do we know what we should request from you guys to make sure all our record keeping is in compliance?

ANSWER: You will need to communicate with us once you are ready to begin making Solo 401k distributions, usually at retirement. Further, as explained above, we will send you an e-mail every June regarding Form 5500-EZ. Further, please call or e-mail is as we are also open on Saturday.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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