403b Contribution Aggregation Question


I have a 403(b) plan at my day moonlighting job, to which I am planning to max out on employee contribution this year $19.5k. I was reading the IRS rules regarding maximum contribution limits, and there’s one part that’s confusing me. (I have attached the IRS rules sheet.). If you look at “chapter 3; Limit on annual Deductions”, it says that, since I have a 403(b) at work, I have to combine all the contributions that I make to ALL my plans (including my solo 401k for my SE job), to determine my MAC. Is that true? if so, will is still be able to the mega backdoor roth conversion in my solo 401k and max out at $58k in that account? Or will it be less than that?  viz, 58 -19.5= 38.5 k? Here is that paragraph: 


The rule discussed in the above Publication 571 deals with the control group regulations and comes into play if you are an owner in both the business that sponsors the 403b as well as an owner in the self-employed business that sponsors the solo 401k plan.  

In your particular case, the above rule does not apply to you because you are not an owner in both businesses, just the business that sponsors the solo 401k plan. As such, regardless if you have already contributed the full $19,500 for 2021 to your 403b and you also want to maximize the voluntary after-tax contributions to the solo 401k plan you may do so as long as you have the applicable net self-employment income from your self-employed business to support the contribution because voluntary after-tax contributions fall under the overall 457 limit. Visit here to learn more. 

Crypto’s Wild Week/ Proposed IRS Reporting Rules: Time to Move to Solo 401k/IRA LLC?

Harvard Law Attorney George Blower reviews the recent US Treasury proposal to increase IRS reporting of cryptocurrency transactions.

PROPOSAL: https://home.treasury.gov/system/files/136/The-American-Families-Plan-Tax-Compliance-Agenda.pdf

VIDEO SLIDES: https://www.mysolo401k.net/wp-content/uploads/2021/05/Crypto-Wild-Week-IRS-reporting-2.pdf

Proposed IRS Cryptocurrency
Reporting Rules

  • May 2021: US Treasury proposes increased IRS reporting requirement for cryptocurrency transactions
    • Currently, crypto exchanges must issue 1099-K if more than 200 transactions & $20k in gross proceeds
  • Regulatory Context: Continues increased regulatory focus (e.g. enforcement priority, 1040 reporting)
  • Who would be required to report?
    • Cryptocurrency/cryptoasset exchange accounts & payment service accounts that accept cryptocurrencies
      • Note: The language of the proposal does not limit the proposed reporting requirement to transactions greater than $10,000
    • Businesses that receive cryptoassets with a fair market value of more than $10,000
      • Compare with the current requirement to report cash transactions of $10k and greater (Form 8300)
  • Regulatory Objectives: Detect Criminal Activity & Tax Collection

Advantages of Crypto Investing
in Your Retirement Account

  • Tax Shelter/Tax-deferred
    • Potentially tax-free via Roth 401k/Roth IRA LLC ØSimplify Taxes
  • Since cryptocurrency is considered personal property for tax purposes, trading cryptocurrency or using it to purchase goods/services is a transaction subject to capital gains:
    • Transaction history including fair market value throughout to determine cost basis, etc.
    • Records to determine the length of time owned to determine if subject to short-term or long-term capital gains
    • Note: Many exchanges don’t provide this information
  • Practical Impact: Increased Reporting will increase the importance of opening the crypto exchange account under the EIN of the Solo 401k/IRA LLC

Advantages of Crypto Investing

  • Access to a broader range of cryptocurrency exchanges
  • Ability to store cryptocurrency in a physical hardware wallet
  • Private Transactions
  • Invest in other alternative investments
    • Checkbook control

Impact of 403b Day-Time Job Contributions to Solo 401k Contributions including voluntary After-Tax Contributions

If you participate in both a 403b plan through your day-time employer where you are not an owner of the employer that sponsors the 403b plan, and also participate in a solo 401k  sponsored by your self-employed business,  your annual contributions to both plans may be impacted as described below.

Employee Deferral Limit

The employee deferral limit –that is, the $19,500 for 2021 is aggregated across your day time employer 403b and your self-employed business solo 401k plan.
Therefore, you cannot make employee deferral limit contributions at the pretax and Roth solo 401k level if you have already maxed out the employee deferral limit to your day job employer 403b plan.

Voluntary After-Tax Solo 401k Contributions NOT Impacted

HOWEVER, the above employee deferral rules do not apply to voluntary solo 401k after-tax contributions (aka the mega backdoor Roth solo 401k) because 401k voluntary after-tax contributions fall under the “overall 415 limit”. The overall limit essentially allows the self-employed business owner to maximize voluntary after-tax solo 401k contributions as long as he or she has enough net self-employment income to justify the overall limit contribution of $57,000 for 2020  which increased to $58,000 for 2021.

How to Deposit a Rollover Check Into the Charles Schwab Brokerage Account for the Self-Directed Solo 401k

If you used Charles Schwab for the self-directed solo 401k (aka company retirement brokerage account-CRM), the following rollover check deposit procedure applies: 

1. In the memo section of the rollover check, write the Charles Schwab brokerage account number for the designated pre-tax brokerage account of the self-directed solo 401k.  
2. On the back of the check sign your name.
After you sign, write, Trustee of “list the name of your self-directed solo 401k”
Then write For Deposit Only.
Then write the Charles Schwab brokerage account number for the self-directed solo 401k  pre-tax designated brokerage account.
IMPORTANT Note: repeat the above if you also received a rollover/transfer check for Roth 401k former employer funds but make sure to reference the Roth self-directed solo 401k brokerage account instead of the pretax one so that the funds get deposited into the correct brokerage account.
3. Then overnight the rollover check to Schwab Operation Center located in one of the following centers depending on the closest location to you.
Overnight Mailing Address
Charles Schwab & Co., Inc.
El Paso Operation Center
1945 Northwestern Drive
El Paso, TX 79912
Overnight Mailing Address
Charles Schwab & Co., Inc.
Orlando Operation Center
1958 Summit Park Dr., Ste. 200
Orlando, FL 32810

ROBS 401K – Deep Dive Re Form 5500 Filing/Recordkeeping/Annual Compliance (IRS/DOL)

Please check out our webinar reviewing the annual Form 5500 requirement for ROBS 401k plans.

VIDEO SLIDES: ROBS 401K Webinar – A to Z Guide Form 5500

ROBS 401K – What is Form 5500?

  • “Informational” tax return
  • Provides information about the 401k plan
  • Filing the Form 5500 is consistently recognized by the Internal Revenue Service (IRS) and the Department of Labor as of one of the most important compliance requirements applicable to 401k plans.

ROBS 401K – Which Form 5500 to file?

  • Do NOT use 5500-EZ
  • Use Long Form Form 5500
  • Filed with the Department of Labor (not the IRS)
  • Filed electronically via the EFAST

FAQ: Do I have to file if the value is less than $250k?

  • Yes
  • No minimum plan asset value
  • Contrast with $250k minimum for Solo 401k plans

ROBS 401K Form 5500 – What info is reported?

  • Number of Participants
  • Type of business (i.e. business code)
  • Contributions, Rollovers & Distributions
  • Total Value of the Plan Assets (as of the beginning & end of the plan year)
  • Value of Specific Assets in the 401k (NOT business assets)
    • Company Stock (Per Valuation of ROBS C-corporation)
    • 401k Participant Loans
    • Alternative Investments (e.g. real estate, private placements)

ROBS 401K – When is the Form 5500 due?

  • Form 5500 is due seven (7) months after the end of the plan year
    • For 12/31 plan year: 7/31 (or 10/15 if a timely extension is filed)
    • For 6/30 plan year: 1/31 (or 4/15 if a timely extension is filed)
  • Note: May be different than the business tax/fiscal year & not dependent on business C-corp tax return (e.g. Form 1120)

ROBS 401K Form 5500 – Late Filing & Penalties

  • Per the Secure Act, the IRS penalties for late filing increased tenfold (10X) to $250 per day, not to exceed $150,000 per plan year.
    • Note the Department of Labor may also assess penalties
  • Filing under the Department of Labor’s Delinquent Filer Voluntary Correction Program (DFVCP) caps the penalty to $750 for each late Form 5500.

ROBS 401K Final Form 5500 – Closing/Selling
Your Business

  • If you close or sell your business, a Form 5500 will still be required in order to properly wind down the 401k
  • File Final Form 5500 after funds transferred out of the 401k account(s)
    • ROBS C-Corporation sells/liquidates assets and pays back creditors & proceeds distributed to the stockholders including the 401k
    • Rollover 401k funds to an IRA (including issuing a 1099-R)
    • File Final Form 5500