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What are my Self-Directed Solo 401k options if I am no longer self-employed?
For owners of owner-only businesses who are no longer self-employed, and wish to close their solo 401k plan, you have two options:
You can either take the funds from your Solo 401k as a Taxable Distribution. If you are under 59 1/2 you will pay a 10% early withdrawal penalty along with ordinary income taxes on the amount of the distributions. In that case, please submit the following online form to let us the information needed for the required tax reporting: CLOSING PLAN: Full Pretax Solo 401k TAXABLE DISTRIBUTION Form – My Solo 401k Financial
Your other option is to do a direct rollover to another qualified plan such as an IRA. In that case, please submit the following online form to let us the information needed for the required tax reporting: Full Transfer of Pretax Solo 401k to Pretax IRA – My Solo 401k Financial Note: If you have Roth funds, please submit the following online form: Full Transfer of Roth Solo 401k Funds to Roth IRA – My Solo 401k Financial
A final Form 5500-EZ regardless if the value of the account was under $250,000, and a Form 1099-R will need to be issued to formally close the plan with the IRS.