Solo 401(k)
Self-Direct Your IRA or Solo 401(k). Invest in What You Know.
Take Control of Your Retirement™.
4 Key Points to Consider
When Using a Solo 401(k)
1. Title Name
The property and the contract to purchase must be titled in the name of your IRA2. Gain Control
Many IRA real estate investors use an IRA/LLC to better gain control of the transaction and investments.3. Mortgage or Loan
Any mortgage or loan obtained for IRA-owned real estate must be non-recourse and may cause UDFI tax on profits from debt.4. IRA-Owned
IRA-owned real estate must be held for investment and cannot be used by the IRA owner or their disqualified family.Do You Qualify For a Solo 401k?
Solo 401(k) Account: (Can be both Roth and Traditional or Both) Opening Solo 401(k) Next Steps: The Solo 401(k) is an Employee Benefit Plan that is exclusively for business owners that have no full-time employees besides themselves and a spouse. The Plan is adopted by a company, not an individual, that has earned ordinary income from the sale of goods or services.
$995 – Full service, attorney consult, plan documents and plan binder.
$495 – Plan docs, plan binder. No attorney consult.
Does the client already have a Solo 401(k) but it’s either out of date or it is a plan captive with a broker/dealer and you can’t self-direct? Restatement fee is $495
Opening Solo 401(k) Next Steps:
The application is a two-step process. The client will first need to complete the linked application. Once the Solo 401(k) representative receives the KKOS application, the representative will then send Directed Trust Company’s application to the client pre-filled with their information.
Solo 401(k) Application
Solo 401(k) FAQ Sheet
What Account Type is Best?
Please use the table and resources below to help compare
between a Solo 401(k) or a Self-Directed IRA
|
SOLO 401(k) |
SELF-DIRECTED IRA |
|
|---|---|---|
|
Qualification |
Must be self-employed with no Full-Time Employees (besides yourself and a spouse). |
Self-Employment not required – must have earned income to contribute. |
|
Contribution Limits |
Max Annual Contribution = $58,000. |
Max Annual Contribution = $6,000 ($7,000 if over 50). |
|
Custodian Requirement |
You can be the Trustee and Administrator – No Custodian required but one may be named |
You MUST have a 3rd Party Custodian. |
|
Rollover Limitations |
Can rollover most retirement accounts except Roth IRA and 401k with a current employer. |
Can rollover existing retirement accounts. |
|
Loans |
Can borrow up to $50,000.00 from the 401(k) it is called a Participant Loan**. |
Cannot borrow from the IRA. |
|
UDFI Tax |
Real Estate is NOT subject to UDFI Tax. |
Real Estate IS subject to UDFI Tax. |
|
Consequence of Prohibited Transaction |
15% excise tax if prohibited transaction occurs. |
Entire IRA is distributed if Prohibited Transaction occurs. |
Annual Maintenance Options
Choose the pricing plan
that best fits your personal situation
|
ANNUAL COMPLIANCE PLAN |
FULL SERVICE CUSTODIAL |
|
|---|---|---|
|
Trustee/Plan Administrator |
Client is Trustee and Plan Administrator. |
Client is Trustee and Plan Administrator. |
|
Custodian |
No Custodian is named. |
Directed Trust Company named as Custodian. |
|
Bank Account Option |
Client goes to a bank of their choice to set-up a Trust Checking Account. |
Transactions will be made through an account held with Directed Trust Company. |
|
Checkbook Control |
Client has immediate checkbook control through their Trust Checking Account. |
Client needs 401k/LLC to obtain checkbook control. |
|
Record Keeping Responsibilities |
Client is responsible for all record-keeping and IRS filings required of the plan (ie. 5500 EZ or 1099-R**) |
Directed Trust Company handles all recordkeeping and IRS filings required of the plan. |
|
DTC FEE |
$150.00 Annually |
$350.00 for the 1st account, $250.00 for each additional account under the plan. |
VIDEOS AND ARTICLES ON SOLO 401(K) ACCOUNTS:
- Self-Directed IRA Vs Solo 401(k)
- RMDs and Solo 401(k)s
- When to use a Solo 401(k) vs A Self-Directed IRA
- 5 Reasons Why you SHOULD use the Solo 401(k)
- What is a Backdoor 401(k)
- Can you Self-Direct a 401(k)
- 4 Reasons to Ditch Your SEP IRA for a Solo 401(k)
- One-Participant 401(k) Plans
- The Rare Self-Directed Solo 401(k)
Definitions, Deadlines
and Funding Options
|
5500 EZ |
The administrator of the plan is required to file form 5500 EZ with the IRS if their Solo 401(k) plan has a combined value of assets over $250,000. For plans on a calendar year, the deadline for this filing is July 31st. |
|
1099-R |
Issued anytime money leaves a retirement plan (account) or if a Roth Conversion occurs. The deadline for this filing is January 31st. |
|
Participation |
Loan that allows account holders to take loan up to $50,000.00 or 50% of available plan balance. Interest Rate is Prime + 2%. The loan must be paid within 5 years and payments must be made at least quarterly. |
|
New Solo 401(k) Set-Up Deadline |
The Solo 401(k) plan must be established by December 31st to contribute for that year |
|
Employee Contribution Reporting Deadline |
You must report your Employee Contributions via W-2, which is due January 31st, but you have until the company’s tax return is filed to make the contributions. |
|
Constribution Deadline for Sole Prop, Single-Member LLC, or C-Corp |
April 15th (Can be extended by filing an extension) |
|
Constribution Deadline for S-Corp or Partnership LLC |
March 15th (Can be extended by filing an extension) |
FUNDING VIA CONTRIBUTIONS OR ROLLOVERS
401(K)/LLC
Quick Start Guide on
Solo 401k
Please use the table and resources below to help compare
between a Solo 401(k) or a Self-Directed IRA
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Articles On How To
Self-Direct Your Solo 401(k)
New Solo 401(k) Contribution Deadlines: Rules, Steps, and Strategies
As 2019 comes to an end, it is critical that Solo 401(k) owners understand when and how to make their 2019 contributions…..
Self-Directed IRA Versus Solo 401(k)
Many self-directed investors have the option of choosing between a self-directed IRA or a self-directed solo 401k….
Solo K Form 5500 Tax Filing and Five-Point Compliance Checklist
Solo 401(k)s have become a popular retirement plan option for self-employed persons….
Learn More About
Real Estate IRA
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Directed IRA is a Tradename of Directed Trust Company. Directed Trust Company performs the duties of a directed custodian, and as such does not provide due diligence to third parties on prospective investments, platforms, sponsors or service providers and does not sell investments or provide investment, legal, or tax advice.
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