Self Directed 401k Plan Reporting — Video

What this episode covers

The subject of self directed 401k plan reporting is important to say the least. It’s not complex as some think. But knowing the requirements makes life easier for sure. Download Audio   Transcript:   Facts and circumstances. What do we mean by facts and circumstances? As it pertains to a 401K plan there’s very specific rules and regulations that must be followed, not only with what the plan can do; how can it invest the funds, how it must report for those funds. The bottom line is with the individual solo 401K plan one huge benefit that it has compared to a 401K plan with common law employees is the fact that if the assets of the plan are under two hundred and fifty thousand there is no annual reporting that must occur on the assets of the plan. Now, saying that, you still have to make sure you dot the I, cross the T, on things that you need to do, but what do we specifically mean from a plan reporting and what are the exceptions? The exception is, we talked about it, if the plan assets are under two hundred and fifty thousand you do not have to report that annual value to the IRS. Let’s talk about two other exceptions. What if the plan assets are more than two hundred and fifty thousand? Well, in that case the IRS requires you to submit what’s called a Form 5500EZ. Now, EZ stands for, presumably, easy. It is a relatively easy form. It’s a two or three page form where you report the assets of that plan. Once you’ve surpassed two-fifty you always have to prepare the 5500EZ, even if your assets drop back down below the two-fifty figure. That’s exception number one. Exception number two. What happens if you were to stop your self-employed business? Let’s just use an example. You run it for twenty years, you’re now in your sixties, you’ve made a great deal of money in your lifetime, you’ve done well with your 401K plan, not only from the standpoint of making contributions, but having successful returns on your investments, but you’re done. What does that mean for the plan? Some people think that they can continue just to operate the plan as it is. That would not be correct. When a plan is terminated because the business terminates the plan has to submit what’s called a Final Form 5500. A little bit different than the EZ form I talked about, but a Final Form 5500 to report to the IRS that the plan has been terminated, and what is the end result of the assets within the plan. Keep in mind, the great thing about an individual solo 401K plan is that you have very, very little reporting requirements that are responsible for you, but there are some requirements. Always keep in mind, if the assets are more than two-fifty or you terminate the plan you need to make sure you file the respective forms.

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