Backdoor Roth IRA to a Roth Solo 401k

INQUIRY:

1. What I want to do is a "Backdoor Roth IRA" contribution as my income blocks the deductible IRA amount and the Roth IRA direct contribution

2. I want to be able to do a Roth IRA rollover to a Roth solo401K.

Thanks, EC in Wisconsin

ANSWER: 

Currently the IRS regulations do not permit the transfer of a Roth IRA funds to a Roth Solo 401k. Maybe for this very reason: “Backdoor Roth IRA” prospects like yourself.

Properly Titling Self-Directed 401k Brokerage Account

QUESTION: as far as investment, should I try to minimize the possibility of 1099s?  In other words…if I open brokerage/investment accounts should they be 401K accounts (in the name of the self-directed 401K Trust), which, to my knowledge, do not send out 1099s, or will just plain-Jane brokerage accounts work (even in my name) without issue?  If I open 401K accounts and then move money out of them will they then report, I guess on a 1099, the withdrawal?  I’m I making sense here?

ANSWER:  Any account that is opened for holding the self-directed 401k funds must be titled in the name of the 401k using its EIN. Therefore, the brokerage accounts would not by tilted in your personal name but rather in the name of the self-directed 401k. If titled in your name directly, adverse tax implications will develop. Further, when establishing brokerage accounts for the self-directed 401k, special brokerage forms apply which your self-directed 401k provider can provide along with a cover letter. By proceeding in this fashion, no taxable implications or 1099 reporting arises when making investments as the investments will be titled in the name of the self-directed 401k.

 Regards,

EO in South Carolina

Non-recourse Loan to Roth Solo 401k | Disqualified Party | Company

QUESTION: I was wondering if I can take a loan INTO the Roth solo 401k or on the land that is non-recourse to the ROTH solo 401k, or does it need to be non-recourse to me personally?

ANSWER: When you incorporate debt financing when investing your solo 401k—whether pretax or Roth funds— in real estate such as land, the loan must be to the solo 401k and be non-recourse.  Therefore, the non-recourse loan is to the solo 401k  not to the participant as it would be prohibited.

QUESTION: And, can the loan be from a related party: parent or entity controlled by parent.

ANSWER: The non-recourse loan to the solo 401k can be obtained from a bank, company or an individual, for example; however, they must not fall under the solo 401k disqualified party category. For example, disqualified parties include the solo 401k owner, his parents, his spouse, his natural grandparents, people providing services to his solo 401k, his children, and most entities in which the solo 401k owner or any of foregoing disqualified parties own and interest.   

Visit Solo 401k non-recourse loan to learn more.

Thanks!

Jack L. in Florida