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Solo 401(k) Tax Filing Rules

Solo 401(k) Tax Filing

The major question to address when it comes to Solo 401k tax filing is: Are there any annual tax filing requirements for the plan?

Since a Solo 401k plan is considered a trust, under Internal Revenue Codes (IRC) Section 401 and 501, there is generally no requirement to file annual state or federal income tax returns. However, if the assets total more than $250,000, there is one form that must be filed, IRS Form 5500-EZ (or 5500-SF).

What is a Solo 401(k) Plan?

A Solo 401(k) plan is not a new type of retirement plan. It is a traditional 401(k) plan covering only one employee. In general, to be eligible to establish a Solo 401(K) plan, one must be self-employed or have a small business with no full-time employees (over one thousand hours during the year) other than a spouse or other owner(s).

As the name implies, the Solo 401(k) plan is an IRS-approved qualified 401(k) plan designed for a self-employed individual or the sole owner-employee of a corporation. It works best when there are no other employees or a very small number of employees.

What are the Eligibility Requirements for a Solo 401(k) Plan?

A Solo 401(k) plan is well suited for businesses that either do not employ any employees or employ certain employees that may be excluded from coverage. A Solo 401K plan is perfect for any sole proprietor, consultant, or independent contractor. To be eligible to benefit from the Solo 401(k) plan, investors must meet just two eligibility requirements:

  1. The presence of self-employment activity.
  2. The absence of full-time employees.

The business owner and their spouse are technically considered “owner-employees” rather than “employees”. The following types of employees may be excluded from coverage:

  • Employees under 21 years of age
  • Employees who work less than 1000 hours annually or three consecutive years of 500 hours or more
  • Union employees

Nonresident alien employees

Solo 401k Tax Filing Rules

In the case of a Solo 401(k) plan, if the total plan assets in your Solo 401(k) are under $250,000, the 401(k) plan has no filing obligations with the IRS.  The solo 401(k) plan is easy to operate. There is generally no annual filing requirement unless your Solo 401(k) Plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ).

What does Form 5500 entail?

The Internal Revenue Service (“IRS”) Form 5500-EZ is an annual information return that is required to be filed by every “One-Participant Plan” (owners and their spouses), also known as a Solo 401(k) Plan, with plan asset value in excess of $250,000 as of December 31 of the previous tax year. The purpose of filing and reporting the fair market value (“FMV”) of your solo 401(k) plan’s assets is to inform the IRS of assets over $250,000 annually held in a Solo 401(k) Plan. The Form 5500-EZ is due every July 31st of the next plan year. Ex: for a plan that was established in 2023, the IRS Form 5500-EZ is due by July 31st, 2024.

Why Choose IRA Financial to Establish a Solo 401(k) Plan?

IRA Financial “literally” wrote the book on the self-directed Solo 401(k).  Our founder, Adam Bergman, Esq, has written 8 books on self-directed retirement plans and over the last 15+ years has helped over 24,000 self-directed clients invest over $3.2 billion in alternative assets.  IRA Financial is the leading provider of self-directed solo 401(k) plans with “checkbook control.  Our expertise and experience in designing and customizing solo 401(k) plan solutions for entrepreneurs and small businesses is unmatched.

IRA Financial Self-Directed Solo 401(k) solution is specifically designed and customized for each type of investment.  Whether it is real estate, private equity, venture capital, hedge fund, private business, Cryptos, precious metals, hard money loans, or much more, our Solo 401(k) tax experts will work with you to design the perfect Self-Directed Solo 401(k) plan solution for your business and investment goals, including tax optimization, roth maximization, and UBIT protection.  Additionally, IRA Financial is the only self-directed retirement company that provides annual consulting, IRS tax reporting/filings, BOI FinCEN reporting, and a full IRS audit guarantee.

Any Questions?

For questions on the Solo 401k Plan or the IRS Form 5500-EZ (or SF) please give us a call at 800-472-0646 or fill out a contact form here!


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