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Solo 401k Basics: CPA Guest Post – Keeping Good Records

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With a self-directed Solo 401k plan, you are in complete control.  This means you are the plan administrator, trustee, and record keeper. And it’s very important to keep excellent records of your Solo 401k.

Therefore, you’ll keep track of the money coming in and going out of the plan. You’ll keep records of contributions, rollovers, distributions, participant loans, investments, and more. Have no fear if it sounds like a lot of work!  The right Solo 401k plan sponsor will provide you the support forms you need. Additionally, engaging a CPA who has experience with the Solo 401k can help to set you up for success.

In today’s CPA guest post, we asked Angela Sticca Snyder, of Taxanista to give us some guidance Solo 401k plan record keeping.

Money Coming In

There are two main forms of record keeping for your Solo 401k plan: money coming in and money going out. Of course, in those two categories are a few sub-categories so let’s cover them here.

Money might come into your Solo 401k one of two ways: Rollovers and Contributions.

The Solo 401k can generally accept incoming rollovers from almost any retirement plan, including traditional IRAs, other 401ks, 403b, 457, Thrift Savings Plan, pension plans, and more.

If possible, complete a direct rollover or direct transfer of funds. This avoids any taxable distribution or indirect (60-day) rollover. A direct rollover is simply moving funds from one retirement plan to another. Document your incoming rollover with a rollover acceptance form, provided by your IRS-approved document sponsor.

The second way you might bring funds into the plan is from contributions. Keep in mind contributions must come from earnings from the business connected to your Solo 401k. Get a general idea of what you can contribute with a contribution calculator. And always check with your CPA for final contribution calculations.

Document your incoming contributions using a contribution form. Remember to tell your CPA how much you’ve contributed so you can maximize your tax deduction.

A third way you’ll hopefully have money coming into the plan is from earnings on your 401k investments. Keep track of your bank and brokerage statements. Also, keep a record of any distributions, profits, K-1, or 1099 you receive from earnings on your investments.

Money Going Out

You might have money go out of your 401k for a variety of reasons, including participant loans, distributions, or investments. So, it’s important you keep records of all funds movement in the 401k plan.

If you take a participant loan, your document sponsor should provide you with the promissory note, loan amortization schedule, and loan repayment schedule. This provides the appropriate documentation of your loan. Likewise, keep track of any loan repayments you make so you can prove you made the payments in full, and on-time.

When you invest money from the Solo 401k, document it! Usually, you can do this by completing an investment form provided by your IRS-approved plan sponsor. And remember to keep track of investment earnings coming back into the plan and trust.

Sometimes you’ll take money out of the 401k in the form of distributions. These might be early distributions, regular distributions, or even Required Minimum Distributions. As a result, you’ll want to complete a distribution form, typically found in your 401k plan documents.

In-Plan Roth Conversion

Some Solo 401k providers allow you to convert pre-tax funds to Roth while they are still in the same retirement plan. This is an in-plan Roth conversion. Your 401k document provider should have in-plan Roth conversion forms for you to complete. Completing the form is necessary since you have to keep documentation of the conversion. Additionally, your CPA may need to complete IRS form 1099-R. By filling out an in-plan Roth conversion form, you’ll have all the info you need for your CPA to file any required IRS forms.

Keeping Good Records

You can maintain Solo 401k record keeping in a variety of ways. You might keep a simple spreadsheet documenting money coming in and out. Or perhaps you’ll use an accounting software, like QuickBooks. And of course, consider engaging a CPA to help keep the records of your plan.

Having a CPA keep track of the records of your plan also makes tax planning much easier for your CPA.


Finally, it’s critical you complete the appropriate reporting for the Solo 401k plan. This might be a form 1099-R if you roll money out of the Solo 401k, or take a distribution. Or, you might need to complete form 5500-EZ if your total plan assets are $250,000 or more.

If you consistently keep good records in the Solo 401k plan, having the information at your fingertips for any reporting can be a breeze.



About Angela:

Angela is the consummate strategist. She loves listening, analyzing and developing strategic ideas and plans that bring excitement and comfort to those she mentors. She graduated from High School at 16, earned her Bachelors in Accounting at 19; and her Master’s degree in Taxation at the age of 21. She is a federally licensed, IRS Enrolled Agent and maintains a former Federal Top Secret Security clearance. She has over 29 years of expertise in tax preparation, IRS audits, accounting, sales & profit growth, systematizing processes and business coaching.

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Phone: 480-331-3316


Disclaimer: These resources are provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Nabers Group LLC of any of the products, services or opinions of the corporation or organization or individual. Nabers Group LLC bears no responsibility for the accuracy, legality or content of the external party or for that of subsequent services.

4 Responses

  1. Wow that was unusual. I just wrote an incredibly long comment but after I clicked
    submit my comment didn’t appear. Grrrr… well I’m not writing all that
    over again. Anyhow, just wanted to say fantastic blog!

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