Forming two separate Solo 401k plans and inasmuch do a participant loan from each

QUESTION: If one had two legitimate businesses and entities formed, is there anything that would otherwise prevent forming two separate Solo 401k plans and inasmuch do a participant loan from each, and if so permitted would that be a huge red flag for revenue agency and audits. We don't plan anything abusive or even creative but don't want to invite audits unnecessarily as the time, effort and costs are unwelcome.

Thanks,

Beth in Arizona

ANSWER: The rules are tricky. The companies cannot be related or affiliated. See following pages. 

http://www.mysolo401k.net/solo-401k-controlled-group.html

http://www.mysolo401k.net/be-aware-of-multiple-employer-rules-for-401k-contribution-purpose.html

The first thing the IRS will review in the event of an IRS audit is the outstanding solo 401k loans.

Taxability of "elective deferrals" that my client makes to the solo 401k plan

BACKGROUND: My specific question is related to the taxability of "elective deferrals"
that my client makes to the solo 401k plan that your company has set-up.

QUESTION: Is this similar to a regular 401k account that his "elective deferrals" ARE
subject to social security and medicare taxes, but not regular federal
income tax?  

Or is this a 401k hybrid that has absolutely NO tax implications until
distributions are taken?

ANSWER: Because the solo 401k plan sponsoring company is a corporation, both contribution types (salary deferral and profit sharing) will be based solely on W-2 income.  Further, the earnings generated within the solo 401k will grow tax-deferred and not taxed until distributions commence, usually at retirement.  Please visit our on-line solo 401k contribution calculator to calculate the annual solo 401k contribution amount.

Thanks,

Pat H.
Public Accountant
Fort Lauderdale, FL  

Use Your Self-Directed 401k Services | IRA LLC

BACKGROUND: I do want to use your services to roll over my  95 k past employer 401 K account to a self-directed 401k with funds held in a Etrade brokerage account. I had an account with them years ago so I am somewhat familiar with their tool/site etcetera. If you feel there is a better brokerage firm to use, please let me know.

ANSWER: While E-Trade’s brokerage account services can be utilized for the self-directed 401k brokerage account with checkbook feature, I prefer Fidelity as they understand the process really well and make it easy to access the funds, especially if you want to process a solo 401k loan and or invest in alternative investments such as real estate. Simply put, Fidelity has less red tape than E-Trade.

BACKGROUND: In our phone call last week I mentioned the 6,800 Roth held in a state farm annuity composed on $45,800 contributions, $1000 earnings.  Outside of you guys I was thinking of moving to a separate E*TRADE self-directed account…does that seem possible, and do you think there are any conflicts of having the solo 401 k account and the Roth account held that the same broker?  

ANSWER: Assuming you are talking about a Roth IRA, if you are only seeking to invest in stocks and mutual funds, then E-Trade can handle the Roth IRA opening directly. On the other hand, if you want to invest the Roth IRA in alternative investments such as real estate, promissory notes, tax liens and private stock, to name a few, then E-Trade will not be able to support the brokerage account. Instead, you may want to consider opening a self-directed IRA LLC, which we can assist you with. 

I would like to setup the solo 401 k first.

Let me know the next step, your suggestions are appreciated.

ANSWER: To get started with opening solo 401k click here, and, as always, if you have any questions, please give us a call including on Saturdays.

Thanks,

Roger in ID