Making Solo 401k Distributions

A Self directed Solo 401k from mysolo401k.net allows for distributions. However, different distribution rules apply based on contribution types and the Solo 401k participant’s age.

Types of Solo 401k Contributions and Distribution Rules

  •      After-Tax Contributions and Rollover Contributions. The solo 401k plan participant may withdraw at any time (after completing a distribution form), all or any portion of her account balance attributable to “rollover contributions” and/or “after-tax contributions.”
  •    Employer Contributions: Employer contributions are subject to more stringent distribution rules and may be distributed upon the solo 401k participant’s severance from employment, death, or disability. In addition, employer contributions may be withdrawn upon the occurrence of any of the following events:

1) The occurrence of a Hardship,

2) The attainment of age 59 ½

3) The employer contributions being withdrawn have been accumulated in the solo 401k plan for at least 2 years; or

4) The participant has participated in the solo 401k plan for at least 5 years.

  •   Salary Deferrals (employee contributions): Any employee contribution (including any earnings on such amounts) may not be distributed prior to the solo 401k participant’s severance from employment, death, or disability. However, the solo 401k plan permits an in-service distribution of such amounts upon attainment of age 59 ½ or upon a Hardship.

How to Report Self-Directed Solo 401k Distributions & Submitting the Mandatory 20% Federal Tax

The Solo 401k plan distribution will need to be reported several ways and on different dates, and taxes paid by the 15th of the month following the date of the Solo 401k distribution.

By January 31, 2018: You will need to file Form 945 Annual Return of Withheld Federal Income Tax. You can obtain form by clicking on:  http://www.irs.gov/pub/irs-pdf/f945.pdf

Where to file Form 945: Filing depends on your state of legal residence not on the state where you open Solo 401k. Therefore, if your state of legal residence is California, Texas or California, for example, you must mail Form 945 to:

Department of the Treasury

Internal Revenue Service

Ogden, UT

84201-0042

On the other hand, if your state of legal residence is Florida, Massachusetts or New York, for example, you must mail Form 945 to:

Department of the Treasury

Internal Revenue Service

Cincinnati, OH

45999-0042

To find the filing location for your state of legal residence, refer to “Where To File” section of the Form 945 instructions.

By your tax return due date: Report Solo 401k distribution on your tax return

By February 28: File form 1099-R with the IRS, filed by MySolo401k.net and copy sent to you for filing with your personal tax return. For non clients of MySolo401k.net, you should check with your Solo 401k provider regarding the furnishing of form 1099-R to the IRS.

Paying the mandatory 20% federal tax amount on Solo 401k distribution:

  • Must be paid by the 15th of the month following the date of the Solo 401k distribution

 

  • Must pay tax electronically

 

  • Electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS).

 

  • If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf.

 

  • EFTPS is a free service provided by the Department of Treasury. To get more information or to enroll in EFTPS, call 1-800-555-4477.

 

  • You can also visit the EFTPS website at www.eftps.gov. Additional information about EFTPS is also available in Publication 966.

Deposit record.   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. The number can be used as a receipt or to trace the payment.

Depositing on time.   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p.m. Eastern time the day before the date the deposit is due. If you use a third party to make a deposit on your behalf, they may have different cutoff times.

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We help our clients take control of their retirement money. Our products and services provide our clients the freedom to invest their retirement savings in their own business as wells as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities. Learn more about Mark Nolan and My Solo 401k Financial >>

  • About MySolo401k

    We help our clients take control of their retirement money. Our products and services provide our clients the freedom to invest their retirement savings in their own business as wells as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities.
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