Checkbook Solo 401k-QRP: 2019 Year End Maintenance

QRP & Solo 401k Contribution Deadlines

Checkbook Solo 401K and Checkbook SEP-IRA Contribution Deadline. The deadline for contributions to Self-Directed Solo 401(k) Plans and Self-Directed SEP-IRAs is the tax return due date of the business sponsoring the plan, including extensions. Therefore, the contribution deadlines depend on the type of business that sponsored the plan – sole proprietorship, partnership, S-corporation, C-corporation, or LLC taxed as any of the foregoing – and whether you timely file for a tax return filing extension. Filing extensions are especially helpful for those that want to make 2019 contributions, but don’t yet have funds available to do so by the initial required filing date.

W-2 Coordination: Forms W-2, reflecting wages and related tax-reporting for S-Corps/C-corps are filed by 1/31/2020. Therefore, you should make your employee deferral contributions ahead of then, so that they be properly reflected on your W-2.

Deferral Elections: Although deferral contributions can be made to the plan after the end of the year, deferral elections by owners of unincorporated businesses must be made by 12/31/2019. Deferral elections for owners of incorporated businesses must be paid prior to the payroll(s) from which the contribution(s) is withheld. Click here to access Solo 401k 2019 Deferral Election Forms.

QRP & Solo 401k Filing Requirements

Forms 1099-R for Solo 401k Distributions and 401k In-Plan Roth ConversionsForms 1099-R for Solo K distributions must be provided to plan participants by January 31, 2020. Forms 1099-R must be filed with the IRS by February 28, 2020 if paper filed or by April 2, 2020 if electronically filed.

Form 5500-EZ for certain Solo 401k PlansIf Solo 401k plan assets exceeded $250,000 as of December 31, 2019, a Form 5500-EZ is due to the IRS by July 31, 2020. Form 5558 (Application for Extension of Time to File Certain Employee Plan Returns) can be filed with the IRS on or before the normal due date to receive an automatic two-and-a-half-month extension to October 15. Regardless of plan asset value, Form 5500-EZ must be filed for the year in which a Solo 401k Plan is terminated. Checkbook IRAs, for which annual IRS reporting is handled by your custodian, are not required to file Forms 5500.

Forms 990-T (UBIT, UBTI, UDFI) For SDIRAsSD401(k)sSD-DB PlansRetirement accounts that generate more than $1,000 in Unrelated Business Taxable Income (UBTI), should file Form 990-T by April 15, 2020. To request an automatic extension of time to file Form 990-T use Form 8868, Application for Automatic Extension of Time To File an Exempt Organization Return.

Form 990-W (Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations). If UBIT tax liability is expected to exceed $500, estimated tax payments should be made. Payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year.

Solo 401k/QRP Required Minimum Distributions

  • Remember that RMDs required from 401(k) plans and 457(b) plans have to be taken separately from each of those plan accounts. Therefore, if you have more than one defined contribution plan, you must calculate and satisfy your RMDs separately for each plan and withdraw that amount from that plan. This differs from the rules that apply to IRAs, for which you may aggregate your RMD amounts for all of your IRAs and withdraw the total from one IRA or a portion from each of your IRAs.
  • Remember that designated Solo 401k-QRP Roth accounts are subject to the RMD rules. This, too, differs from the rules that apply to Roth IRAs, for which there are no RMD requirements for while the owner is alive. 
  • The penalty for failing to take an RMD is very harsh: The amount not withdrawn is taxed at 50%. The account owner should file Form 5329Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with his or her federal tax return for the year in which the full amount of the RMD was not taken. (The penalty may be waived if the account owner establishes that the shortfall in required distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. In order to qualify for this relief, you must file Form 5329 and attach a letter of explanation.)
  •  As a 5% or more owner of the business that sponsors a Solo 401k, you must start RMDs by April 1 of the year following the year you turn 70½, even if you are still employed by the company and have not yet retired.
  • After the first RMD, you must take subsequent RMDs by December 31 of each year, beginning with the calendar year containing your required beginning date.
  • Your RMD is generally determined by dividing the adjusted market value of your Solo 401k as of December 31 of the preceding year by the distribution period that corresponds with your age in the Uniform Lifetime Table (Table III in IRS Publication 590-B, Distributions Individual Retirement Arrangements (IRAs). If your spouse is your sole beneficiary and is more than 10 years younger than you, you will use the Joint Life and Last Survivor Expectancy Table (Table II in IRS Publication 590-B).

Solo 401k-QRP Year-End Maintenance Resources

Checkbook Solo 401k 2019 Contribution Calculator: Click here to access a web-based 2019 Solo 401k Contribution Calculator. Note: The calculator may be used to provide an approximation of your allowable 2019 Solo 401k contribution amount, not a precise indication of the correct amount. Your actual contribution amount should be calculated in conjunction with your tax professional. Specifically, those that have both W-2 and self-employment income should be sure to work with a qualified professional when calculating their Solo 401k contributions.   

Understanding and Tax Optimizing Your Solo 401k Contributions: Click here for an in-depth discussion of 401k contribution rules and regulations, as well as the tax factors that you should take into account to maximize the tax benefits of your Solo 401k plan.

Helpful IRS Resources For Solo 401k-QRP Plan Maintenance

Podcast: Everything You Need To Know About Self-Directed Retirement Investing

Get answers to the most common questions  – and learn advanced strategies – related to Self-Directed IRA, Checkbook IRA, Self-Directed Solo 401k, and Checkbook 401k. Bernard Reisz CPA was interviewed by John Casmon of Casmon Capital for the Target Market Insights podcast to answer frequently asked questions about the use of tax-sheltered retirement accounts for real estate investing. Continue reading “Podcast: Everything You Need To Know About Self-Directed Retirement Investing”

Self-Directed Real Estate Retirement Accounts For Real Estate Agents

Checkbook 401k plans, Checkbook IRAs, Checkbook QRPs and other self-directed retirement accounts that allow real estate investing with tax advantaged funds should be part of every real estate agent’s financial plan. This article will introduce the fundamentals of such accounts and the opportunities they present for those that have an insider’s view of the real estate market.

What Are Self-Directed Retirement Accounts?

Self-directed retirement accounts, which can be in the form of IRAs or Qualified Plans, allow you to use retirement money for non-traditional investments and retain all the tax benefits of those vehicles. Real estate investing is by far the most popular investment for such accounts, with other common assets being real estate secured private loans, private loans, hard money loans, mortgage notes, and tax liens – all of which are forms of income generation from real property. Continue reading “Self-Directed Real Estate Retirement Accounts For Real Estate Agents”

In-Service Distributions: Checkbook Control Solo 401k, SDIRA & QRP

Checkbook Control QRPs, 401(k) plans, and SDIRAs are powerful vehicles for investing in alternative assets classes, including: real estate, raw land, private loans, hard money loans, private businesses, tax certificates, cryptocurrency, crowdfunded investments, foreign & overseas assets, and so much more.

Getting access to and rolling over funds from your employer-sponsored 401k to a Checkbook QRP, Solo 401k or Checkbook IRA is doable in many instances, but you’ll have to overcome some obstacles to do so. With the knowledge provided in this post, you’ll be prepared to get the results you want.

Unlock Your Employer 401(k) to Get Checkbook Control Continue reading “In-Service Distributions: Checkbook Control Solo 401k, SDIRA & QRP”

Beyond Prohibited Transactions: The Plan Asset Rule

Checkbook QRP,  self-directed Solo 401k and checkbook-control IRA investors are aware (I hope that’s true) of the Prohibited Transaction Rules and Disqualified Persons discussed in IRC 4975. So, if you’re familiar with IRC 4975 are you covered? Or, do you need to know more than that to stay in compliance and protect your assets?

The Plan Asset Rule

There’s a lesser known extension of IRC 4975 in the Code of Federal Regulations that discusses something known as the Plan Asset Rule. In a nutshell, the Plan Asset Rule says that when retirement plans own a “significant” share of an entity, all of that entity’s assets are treated as assets of the retirement plans for purposes of the prohibited transaction rules. The implications of this can be staggering; if retirement plans collectively own a significant portion of an entity, all the disqualified persons of all the retirement plan investors are disqualified persons to that entity. Continue reading “Beyond Prohibited Transactions: The Plan Asset Rule”