Solo 401k Reporting Requirements - Solo 401k (2024)

FAQs

Solo 401k Reporting Requirements - Solo 401k? ›

Form 5500-EZ is the filing requirement for Solo 401k plans with $250,000 or more in plan assets. It is simply an informational return that is filed with the IRS. Solo 401k plans with assets totaling less than $250,000 have no filing requirement at all.

A one-participant 401(k) plan is generally required to file an annual report on Form 5500-EZ if it has $250,000 or more in assets at the end of the year. A one-participant plan with fewer assets may be exempt from the annual filing requirement.

It acts and is treated like any other 401(k) plan. Essentially, this plan has the sole owner and sole employee making contributions to the same one plan. This means you will report the total amount (as sole owner and sole employee) contributed as an adjustment on Schedule 1, line 16.

401(k) plan

Contribute up to an additional 25% of your net earnings from self-employment for total contributions of $69,000 for 2024 ($66,000 for 2023, $61,000 for 2022; $58,000 for 2021; $57,000 for 2020 and $56,000 for 2019), including salary deferrals.

If, at the end of the year, the total assets in your solo 401(k) are worth less than $250,000, you need make no annual tax filings of any kind with the IRS. However, an annual tax filing is required if the total balance of your plan exceeds $250,000 at the end of the year. The filing deadline is July 31.

Form 5500-EZ is the filing requirement for Solo 401k plans with $250,000 or more in plan assets. It is simply an informational return that is filed with the IRS. Solo 401k plans with assets totaling less than $250,000 have no filing requirement at all. It's important to distinguish between form 5500-EZ and form 5500.

The trustee of the solo401K will issue the 1099-R to you ... you do not need to issue one to yourself. Ask the trustee when the 1099-R will be issued.

Voluntary after-tax Solo 401k contributions may be reported in Box 14 of the W-2 (Optional). Employer Solo 401k contributions are not reported on the w-2.

They're not limited to 25 percent of their salary, as in some other plans. This feature can allow them to minimize taxes, though this contribution doesn't help them avoid the self-employment tax. In other respects, the solo 401(k) operates like any other 401(k) plan, whether it's a traditional 401(k) or a Roth 401(k).

Many plan sponsors will use the plan participant's social security number or business EIN as the plan tax identification number. However, any Solo 401(k) plan that wants to establish a bank account will likely need an EIN for the plan.

What is the downside of a Solo 401k? ›

There is a downside, however, since setting up and managing the plan is usually a bit more intensive. You'll have to file a special form with the IRS each year if your account balance exceeds $250,000, and you may find that the fees are somewhat higher than what you'd pay for an IRA.

While both Individual 401k and Solo 401k are for the owner-only business owner/self-employed, brokerage firms and large financial institutions generally refer to their owner-only 401k as Individual 401k. Generally, these firms only allow you to invest Individual 401k in mutual funds and stocks.

A solo 401(k) is generally considered a better option for solo practitioners than a SEP IRA, because it offers the following additional features: Employee deferrals – Unlike a SEP IRA, a solo 401(k) allows both employer and employee contributions.

The Roth solo 401k has a 5-year rule

You can take withdrawals from your traditional solo 401k as soon as you reach the age of 59½. You can take withdrawals from your Roth solo 401k when you're 62 years of age, since that is when 5 years have passed since making your first contributions.

If you're at least 50 years old, you can add a catch-up contribution of $7,500, for a total employee contribution of $30,500. You can choose to contribute up to 100% of your compensation, provided you don't exceed these limits. Feed your brain. Fund your future.

If a distribution is made to you under the plan before you reach age 59½, you may have to pay a 10% additional tax on the distribution. This tax applies to the amount received that you must include in income.

Contributions to a solo 401(k) are usually made with pre-tax dollars, which reduces your current taxable income. However, the tax treatment is different when you establish a Roth account. For this type of solo 401(k), you would pay taxes upfront on your contributions.

If you made employee pre-tax contributions to your Solo 401k, report them on Schedule 1, Line 16 of your 1040 tax return. These contributions will reduce your taxable income for the year.

The deduction will be reported on Schedule 1, line 16 of your federal tax return. You must make a special computation to figure the maximum amount of elective deferrals and nonelective contributions you can make for yourself.

What are the rules for withdrawing from this account? You must have a triggering event—generally either termination of employment or retirement—to take a distribution. Generally, all withdrawals are subject to taxes. Withdrawals before age 59½ may be subject to a 10% penalty.