Self-Directed 401k Checkbook Control Do’s and Don’ts

While a Self-Directed 401k with checkbook control is not required in order to gain access to investing in alternative investments such as real estate, precious metals, trust deeds, tax liens, private company shares (passively only) and even foreign real estate in places such as China, Italy, Greece, Mexico, Costa Rica, Canada, India, etc., if you decide to add the checkbook control feature to your Self-Directed 401k make sure to first understand the do’s and don’ts of of Self-Directed 401k checkbook control.

Background: Self-Directed 401k
Before discussing the do’s and don’ts of Self-Directed 401k with checkbook control, let’s first compare the Self-Directed 401k vs Self-Directed 401k checkbook control.
Self-Directed 401k Defined
Used to describe a 401k for the self-employed that names him or her as trustee of the 401k and  includes specific language in the Solo 401k plan document allowing for alternative investments and for the trustee to self-trustee the assets of the Solo 401k. Alternative investments include real estate, tax liens, commodities, private equity, promissory notes, etc.

Self-Directed 401k Checkbook Control Defined
Just like a Self-Directed 401k, the self-employed business owner has control over the investment decisions of his or her Self-Directed 401k and thus has the option to invest in alternative investments such as real estate, precious metals, tax liens, promissory notes, commodities, private company shares; however,  investment purchases are made by writing a check from the Self-Directed 401k bank account-hence why it’s commonly referred to as Self-Directed 401k checkbook control.

The Do’s and Don’ts of Self-Directed 401k Checkbook Control

The Do’s

  • Do open checking account in  the name of the Self-Directed 401k not your personal name as it will be considered an immediate and taxable Self-Directed 401k distribution.
  • Do open multiple Self-Directed 401k checking accounts if both Solo 401k trustees will be making contributions to the Solo 401k, and/or one or both trustees will be making both traditional and Roth Solo 401k contributions.  
  • Do deposit gains from the self-directed 401k investments ; for example, real estate gains such as rents or proceeds from the sell of real-estate property.
  • Do pay expenses associated with investments held in the Self-Directed 401k, such as rental property repairs.
  • Do make annual Self-Directed 401k contributions to the Self-Directed 401k checking account(s). Note that if both trustees are participating in the Self-Directed 401k, each respective trustees’ contributions need to be deposited in their respective Self-Directed 401k checking accounts.

The Don’ts

  • Do not deposit personal funds in Self-Directed 401k checking account(s) unless they are truly Self-Directed 401k contributions from self-employment income and you qualify to make them.
  • Do not obtain credit card in the name of the Self-Directed 401k or in your name.
  • Do not deposit funds from Self-Directed 401k to your IRA without first checking with your Solo 401k provider if the rules allow for it or without filling out the necessary forms and understanding that it’s a reportable transaction to the IRS on Form 1099-R using letter “G” in box 7.
  •  Do not pay personal expenses with funds from your Self-Directed 401k as it’s considered a taxable distribution.
  • Do not pay your self a salary with funds from the Self-Directed 401k as it will considered a prohibited Solo 401k transaction.
  • Do not commingle Roth Self-Directed 401k contributions and investment gains with Traditional Self-Directed 401k funds.
  • Do not process Solo 401k Loan without firs having your Solo 401k provider prepare Solo 401k participant loan documents and payment schedule that conforms with the IRS Solo 401k rules.

Advantage QUESTION:

Is there an advantage of having the checkbook for my solo 401k trust in my retail bank versus an investment firm like Fidelity Investments?


Having a brokerage account allows for investing in traditional investments (e.g. mutual funds, stocks, etc.) that you can’t invest in via a bank.  Having a bank account allows for access to bank checks & a debit card.  You can have both a bank and a brokerage account as long as both holding accounts are opened in the name of the solo 401k trust using the trust’s EIN for reporting purposes.

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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 >>


  1. Posted October 28, 2020 at 2:32 pm | Permalink

    I have a single owner s-Corp and set up a solo-401k. I plan to max out contributions but am confused on one point. I know my employee contributions must the added to my W2 through payroll but what I do not know is if I have to run the payroll first before actually contributing the funds. OR as long as I report the total contribution before the end of the year is it ok? As in I contribute $5000 in three different months and report it before the end of the year or do I need to report the $5000 then transfer the funds each time?

  2. Posted November 17, 2020 at 8:27 pm | Permalink

    Because a solo 401k plan is not a full-time employer 401k so it is not subject to ERISA, you have until your business tax return due date plus extension to make both the employee and employer profit sharing contributions. Contributions can be made periodically or in one lump sum by the above deadline. The annual solo 401k contribution limits depends on the type of entity sponsoring the solo 401k plan. If the entity type is a C-Corporation, it is equal to W-2income from your self-employed business (“Box 1 plus any pre-tax elective deferrals NOT in Box 1).
    If the entity type is an S–Corporation, it is equal to W-2income from your self-employed business (“Box 1 plus any pre-tax elective deferrals NOT in Box 1). The self-directed 401k contribution deadlines are based on the type of entity sponsoring the solo 401k. If the entity type is an S-Corporation (calendar year), the annual solo401k contribution deadline is March 15, or September 15 if tax return extension is timely filed.
    If the entity type is an C-Corporation (calendar year), the annual solo401k contribution deadline is April 15, or September 15 if tax return extension is timely filed.

  3. Posted June 10, 2021 at 8:00 pm | Permalink

    I have a single member LLC and currently take owner draws from the business. I do not pay myself a salary through a w-2. Can I still contribute to the employees salary deferral portion of my solo 401k? If so with out a w-2 paycheck how do I correctly do that? Thank you so much for all of this incredible information. Sven

  4. Posted August 18, 2021 at 7:44 pm | Permalink

    I have a CD that is maturing at year end in my IRA.
    I also am a minority owner of a LLC (LLC#1) that owns another LLC (LLC#2). The LLC#2 owns Rental Real Estate. If I set up a self directed 401K, would I be allowed to loan money from my matured CD by simply refinancing out/paying off the Mortgage of Real Estate owned by LLC#2.

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