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 Conversions. Forms 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 Plans. If 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 SDIRAs, SD401(k)s, SD-DB Plans. Retirement 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 5329, Additional 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
Checkbook 401k Loan Interest Payments can be viewed as a way to make backdoor contributions – beyond the Solo 401k contribution limits – to your Checkbook Solo 401k tax advantaged retirement accounts. Once those interest payments are paid to your Solo 401(k) plan or QRP, those funds become additional plan assets that can be invested tax-free.
- Do you have debt to pay off?
- Do you want to purchase a new vehicle?
- Pay for education?
- Or, would you like to make an investment outside your QRP or Solo 401k?
The Checkbook Control QRP & 401k loan feature is your best option and in this post will cover all that you need to know to legally take advantage of this Checkbook QRP feature. Continue reading “QRP & Solo 401k Plan Loan: FAQ & Answers”
What type of funds can be contributed to a Solo 401k Roth account?
There are many sources of funds for Self-Directed Solo 401k plans and most – but not all – can be contributed to the Roth Solo 401k subaccount. Following are eligible sources of funds for a 401(k) Roth account: Continue reading “Roth Solo 401k Contribution Guide”
What is a Roth Solo 401k Plan? What is a Solo 401k Plan?
401K Plans, creatively named after Section 401(K) of the Tax Code, are Defined Contribution qualified retirement plans that allow employees to choose (“elective deferral”) to contribute all or part of their compensation to a tax-advantaged account and exclude the amounts contributed from current taxable income. The tax code calls this a “cash or deferred arrangement,” or CODA. A 401k Plan can be combined with other types of plans, such as Defined Benefit and Cash Balance Plans, to maximize tax deductions and allow for multiple forms of plan contributions. The typical 401(k) Plan provides for employer profit sharing contributions, in addition to employee contributions. Self-Directed Solo 401(k) Plans are 401(k) plans for businesses that don’t have full-time employees other than business owners and their spouses, which can be designed to include very attractive features such as Roth 401k Contributions and After-Tax Employee Contributions.
What is a Roth Solo 401k Plan?
Private Lending IRAs and Checkbook Control
Private lending is the ideal investment for an IRA…and less than ideal outside of an IRA.
Understanding why that’s the case – and why a checkbook control IRA is crucial to maximizing private lending investment returns – requires an understanding of tax and investment concepts. In this post we’ll cover the income tax treatment of private lending inside and outside of retirement accounts (IRAs, Solo 401k plans) and why a Self-Directed IRA with Checkbook Control is the IRA you need for private lending. Additionally, if you’re a real estate investor, you’ll learn how to get funding for deals by leveraging the IRAs of private lenders. Continue reading “Private Lending IRAs: The SDIRA Checkbook Retirement Account Advantage”