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 IRA

2. 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Does the client already have a Solo 401(k) but it’s either out of date or it is a plan captive with a broker/dealer and you can’t self-direct?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.

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

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

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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….

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