Self-employed Solo 401k FAQ- Do I need to pay taxes on funds I rollover from my IRA to my solo 401k?

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Self-employed Solo 401k Question: I am looking to set up a Solo 401k in order to invest in real estate.  If I rollover funds from my rollover IRA to the Solo 401k, will I need to pay taxes on the amounts rolled over?

Great question!

No – the funds will be transferred as a non-taxable direct rollover (i.e. the transfer is reportable but not taxable).

One of the most popular ways to fund the solo 401(k) is to rollover money from a pre-existing retirement account like a former employer plan or non-Roth IRA.

As part of our Solo 401k establishment process, we guide our clients through the transfer process: whether that’s preparing transfer paperwork, providing online instructions etc.

We have deep experience having helped 1000s of clients rollover funds from 100s of different financial institutions (e.g. IRA at Vanguard, former employer plan at Fidelity, etc.) and we can leverage that experience to make the process easy for our clients.

ROBS Program 401k Business Financing FAQ – What are my options if my business deal falls through?

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ROBS Program FAQ: I am looking to use 401k business financing to finance the purchase of an existing wine shop.  This deal might fall through and now I am looking to buy a chocolate shop – is that ok?

It is certainly acceptable from a 401k business financing perspective if the C-corporation that is funded with your retirement starts or buys another business.

In other words, you won’t be locked in from a ROBS 401K business financing perspective to your original business plan. As long as the business is an active operating company (e.g. providing goods and/or services) and you are buying the business from an unrelated person, it is compatible with the ROBS program.

Solo 401k FAQ – Does my business need to make a profit before I can make Solo 401k contributions?

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Self-employed 401k Question: My business is taxed as an S-corporation and I receive w-2 wages of $50,000 per year.  Does my business need to show a profit in order for me to be able to make profit-sharing contributions?

Great question.

The ability to make Solo 401k contributions is one of the top reasons that our clients set up accounts with us.

We field questions every day from our clients in terms of how much they can contribute, the deadline, etc.

With regards to this question, please note that the Solo 401k owner’s ability to make employee contributions as well as employer (profit-sharing) contributions is based on the W-2 wages that such person receives from the business.  

For example, in this case the Solo 401k owner could make an employer (profit-sharing) contribution equal to 25% of your w-2 wages (i.e. $12,500).

For more information see: https://www.mysolo401k.net/solo-401k/solo-401k-contribution-limits-and-types/

ROBS Program 401k Business Financing FAQ – Can my family members work in my ROBS-funded Business?

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ROBS Program FAQ: I am using the ROBS 401k plan to fund a new home construction business.  Can the C-corporation hire my family members?

Good question as a ROBS-funded business must follow certain requirements!

Yes – the C-corporation may hire your family members as w-2 employees, and they may receive reasonable compensation based on the work that they are performing once the C-corporation is generating income to justify their compensation.

ROBS Program 401k Business Financing FAQ – Do I need to hire a CPA tax advisor for my business?

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ROBS Program Question: I am planning on using your 401k business financing to fund a franchise.  I’ve always done my own personal income taxes lately using TurboTax.  Will I need to hire a CPA to manage the business taxes?

In order to satisfy the 401k business financing rules, the business must be operated as a C-corporation including filing applicable C-corporation tax returns (e.g. 1120 at the federal level). 

As such, clients find it essential to work with a CPA or other tax advisor to handle the business tax returns.This will provide the new entrepreneur time to focus on growing the business.

Self-directed Solo 401k Daily FAQ – Can I take a Solo 401k loan? How does it work?

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Self-directed Solo 401k Daily FAQ: I previously set up a Solo 401k plan with your company.  I need to replace my roof on my home.  Can I take a loan from my Solo 401k?

Certainly – you can take a loan of up to 50% of the balance not to exceed $50,000. 

The loan must be paid back in monthly or quarterly payments with equal payments of principal and interest (prime plus 1%) spread over a 5-year term. 

We will prepare the required loan documents are part of our services for no additional

Self-directed IRA LLC Question Answered – Can I fund my IRA LLC bank account with personal funds?

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Self-directed IRA LLC Question: I am looking to set up a Roth IRA LLC to invest in cryptocurrency.  Can I fund the LLC bank account with personal funds?

In short: No – the LLC bank account has to be funded with funds from your Roth IRA.

It is important to understand the IRA LLC structure.

A self-directed IRA LLC allows someone who is not eligible to set up a Solo 401k (e.g. because such person is not self-employed or even if they are self-employed, they’re not eligible to set up Solo 401(k) plan because they have full-time W-2 employees working for their self-employed business) to be able to invest his or her retirement funds in alternative investments with checkbook control.

Another scenario where a Self-directed IRA LLC is often used is when someone (even who is eligible to set up a Solo 401k) wishes to invest funds in a Roth IRA in alternative investments with checkbook control.  This is because one can’t transfer funds from a Roth IRA to any type of 401k including a Solo 401k.

With the IRA LLC structure, the sole member of the LLC is the individual’s IRA and such person is the manager of the LLC. Ultimately the IRA funds are deposited in a bank account under the name of the LLC, and as the manager of the LLC such person will have direct checkbook access to the funds.

Since the LLC is an investment held in one’s IRA account, one cannot fund that LLC bank account with personal funds.  If such person was eligible to make an IRA contribution, such contribution amount would have to be deposited first into the IRA and then invested from the IRA into the LLC bank account.

ROBS Program 401k Business Financing – How many shares in the ROBS C-corporation will I receive?

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ROBS Program Question: I am funding a new hair salon with $150,000 of 401k funds and $50,000 from my savings.  I see that the new C-corporation is authorized to issue 1 million shares.  Does this mean that 750,000 shares will be issued to my 401k and 250,000 shares issued to me personally?

Good question!

No – the shares will be issued for a $1 per share.  It is a best practice to leave a portion of the shares as authorized but not issued so that they are available for future investment(s) if desired.

In order to use one’s retirement funds for business financing without having to pay taxes or penalties, one must follow specific steps including investing one’s retirement funds in the stock of a new C-corporation.

When the C-corporation is registered with the Secretary of State, one has to let the Secretary of State know how many shares the corporation is authorized to issue.

For example, the corporation may be authorized to issue 1,000,000 shares but as part of the initial investment via the ROBS program issue shares at a $1 per share such that there remain authorized but unissued shares.

Mega Backdoor Roth IRA and 401k Bans NOT included in Inflation Reduction Act!

This past Sunday, the Senate voted to pass the landmark Inflation Reduction Act which is a scaled-down version of the Build Back Better (BBB) legislation that failed to pass last year.

Recall that the last year’s BBB legislation included bans on the Mega Backdoor Roth Solo 401k and Backdoor Roth IRA as means to raise revenue to offset the cost of the proposed spending in the Act.

Rather than include the Mega Backdoor Roth bans, the version of the legislation passed by the Senate will raise taxes on corporations including a 15% minimum tax on corporations with an income of at least $1 billion as well as a 1% excise tax on stock buybacks of publicly traded corporations.

Does this mean that I can still make Mega Backdoor Roth contributions to my Solo 401k?

While we will continue to diligently monitor legislative proposals that might impact the ability to make Mega Backdoor Roth Solo 401k contributions, the decision to not include the previously proposed bans in the legislation significantly reduces the likelihood of a ban for now and self-employed individuals with Solo 401k plans that support Mega Backdoor Roth Solo 401k contributions can proceed as normal.

For more information, please see The Mega Back Door Roth Using a Solo 401k Plan – My Solo 401k Financial

ROBS 401K Business Financing Program – What name should I use for my ROBS C-corp to buy a business?

Please check out this good question from our Daily Live Zoom call. Subscribe to our YouTube Channel to get notifications of our Daily FAQs.


ROBS Program Question: I am using your 401k Business Financing plan to purchase the assets of an existing online marketing firm with a good reputation in the industry.  It is very important that I can use the name of the existing business.  Should the new ROBS C-corporation be registered under the name of the business that I am buying?

Good question as many of our ROBS 401K clients use the ROBS Program to finance a business acquisition.

The first step of the process is forming a new C-corporation. 

While the C-corporation won’t be able to be registered under the name of the existing business (since the name is already taken), you can work with your business tax/legal advisor(s) to ensure that the seller is obligated to take all steps to transfer the name as part of the sale (e.g. the ROBS C-corp could later change its name or adopt the name as a “DBA”).

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