If you’ve chosen to do an indirect rollover to fund your Solo 401k plan, your custodian will have sent the check directly payable to you personally.
You have 60-days from the original date on the check to deposit the funds into a qualified retirement plan structure, such as your Solo 401k.
You will need to document the indirect rollover on your tax return, as the IRS wants to see a paper trail of where your funds went. This also helps the IRS to determine if any taxes are due on your rollover.
Please refer to Form 1040, and input the indirect rollover amount in Box 16a. In Box 16b, you’ll note $0 rollover.
Please refer to the IRS instructions for form 1040 form page 25-26 with any questions you or your CPA might have.
If you’ve done an indirect rollover, your custodian will send you a form 1099-R documenting the amount that was distributed from your retirement plan. Any deviation from this amount will be a taxable event.
Example:
You receive an indirect rollover check made payable to you in the amount of $95,000. You have 60-days to deposit the $95,000 into a qualified plan such as your Solo 401k (with funds being deposited into your Solo 401k trust bank or brokerage account).
If you choose to only deposit $94,000 into your Solo 401k trust bank or brokerage account, taxes will be due on the $1,000 not deposited and it will be considered a taxable distribution, subject to early withdrawal penalties if applicable.
To keep things simple, do a direct rollover whenever possible! Let a team member know if we can help you with this.
