How to pay the mandatory 20% federal tax amount on Solo 401k distributions:
- 20% Mandatory Federal Tax Withholding Based on Distribution Amount: 20% for federal taxes that must be withheld at the time of Solo 401k distribution and sub
mitted to the IRS electronically.
- See the following link regarding this rule: http://www.mysolo401k.
net/does-the-20-federal-tax-wi thholding-apply-to-all-401k–di stributions/
- 15th of the Month: Must pay tax electronically by the 15th of the month following your Solo 401k distribution date.
- Solo 401k EIN: Use the Solo 401k Employer Identification Number when making the 20% Federal tax payment.
- Electronic: Electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS).
- Tax Professional: 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. ( I recommend this method vs EFTPS since you don’t process a large number of distributions.)
- EFTPPS: 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 https://www.eftps.gov/eftps
/Additional information about EFTPS is also available in Publication 966.
- Please also visit our website for tips on how to enroll in the EFPTS system: https://www.
mysolo401k.net/enrolling-in- eftps-to-pay-taxes-due-on- solo–401k-taxable- distribution/
- Deposit record. For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with your 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.
Additional Reporting Applies to Solo 401k Distributions, which is your responsibility CLICK HERE to learn more.