How to formally terminate or close a Solo 401k or Individual 401k

If the funds or assets are transferred/directly rolled over to another 401k, or to a self-directed IRA

1.     Issue 1099-R to the IRS to report the direct rollover of the solo 401k to the IRA (prepared by the solo 401k provider in January or February of the year following the plan closure  and mailed to the IRS, with a copy to the solo 401k trustee for filing with his or her tax return).

Compliance Note 1: The transfer of the solo 401k or Individual 401k is reported on form 1099-R using code “G” which communicates to the IRS that the funds and/or assets were transferred to another qualified plan or IRA. If any code other than “G” is reflected, contact the solo 401k provider immediately to avoid adverse tax consequences.

Compliance Note 2: If the solo 401k funds and/or assets are directly rolled over to another qualified plan such as a 401k,or an IRA, the tax payer will need to also report the transfer or direct rollover on Form 1040 (personal tax return) lines 16a and 16b. Enter the amount transferred on line 16a and on line 16b write “0”.

2.     Issue Final Form 5500 EZ to the IRS to formally close/terminate the solo 401k plan (prepared by the solo 401k provider by  July of the year following the plan closure/termination and e-mailed or mailed to solo 401k trustee for signature and submission to the IRS)

3.     If applicable, prepare assignments to move the real estate or any other alternative investments to the  receiving IRA, or 401k.