Feb 26

IRA Financial Group Offers In-House CPA Service

IRA Financial Group is the only full service Solo 401(k) Plan facilitator that offers its clients the ability to consult with our in-house tax accountants and CPAs, in addition, to our tax professions. Our in-house CPAs are specially trained in the taxation of retirement accounts, which allows us to provide our clients with specialized tax advice and offer tax filing and reporting services relating to the use and taxation of 401(k) Plan funds to make investments. Because the Solo 401(k) Plan is governed by a complicated set of IRS and ERISA tax rules, it is crucial to work directly with specially trained tax professionals and CPAs.

The Taxation of a Solo 401(k) Plan

The one-participant 401(k) plan is not a new type of 401(k) plan. It is a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) plan. The Solo 401(k) Plan is a qualified retirement plan that is governed by Internal Revenue Code Section 401. A Solo 401(k) Plan is a tax-exempt qualified retirement plan. In other words, in general, a Solo 401(k) Plan is not subject to any tax earned on any passive income allocated to the Solo 401(k) Plan.

Annual Tax Reporting Requirement – IRS Form 5500-EZ

A Solo 401(k) plan is generally required to file an annual report on IRS Form 5500-EZ if it has $250,000 or more in assets at the end of the year. A one-participant plan with fewer assets may be exempt from the annual filing requirement.

Solo 401(k) Plan In-House CPA ServiceIn-House CPA Services

The IRA Financial Group has designed a specialized Solo 401(k) CPA service, which will offer clients the ability to consult with specialized Solo 401(k) Plan trained CPAs on a wide variety of tax & ERISA matters concerning the Solo 401(k) Plan. Below is a list of some of the services offered by our in-house CPAs:

  • Advising clients regarding Federal Income tax matters concerning the establishment, maintenance, and operation of a Solo 401(k) Plan
  • Advising clients regarding ERISA tax matters concerning the establishment, maintenance, and operation of a Solo 401(k) Plan
  • Advising clients regarding state income tax matters concerning the establishment, maintenance, and operation of a Solo 401(k) Plan
  • Assisting clients with the completion and filing of IRS Form 5500-EZ
  • Assisting clients with the completion and filing of any Federal Income tax Partnership returns in connection with the employer which adopted the Solo 401(k) Plan
  • Assisting clients the completion and filing of any state Income tax returns in connection with the employer which adopted the Solo 401(k) Plan
  • Advising clients on the IRS prohibited transaction rules as they pertain to federal and state tax matters concerning using a Solo 401(k) Plan to make investments
  • Advising clients regarding the Unrelated Business Taxable Income (UBTI or UBIT) rules concerning a Solo 401(k) Plan investment
  • Advising clients regarding the Unrelated Debt Finance Income (UDFI) tax rules concerning a Solo 401(k) Plan investment
  • Assisting clients the completion and filing of the IRS Form 990-T in connection with a Solo 401(k) Plan investment that generates UBTI and/or UDFI
  • Assisting clients with the day-to-day accounting and management of the Solo 401(k) plan investments (QuickBooks)
  • Solo 401(k) Plan annual asset valuation services
  • Advising on the federal and state asset & creditor protection rules relating to the use of a Solo 401(k) Plan

Specialized In-House CPA Service for Real Estate Investors

When it comes to engaging in a real estate transaction with a Solo 401(k) Plan there are a number of important IRS and tax rules that must be followed. For example, IRC Section 4975 prohibits an Plan owner to engage in a transaction that directly or indirectly benefits him/or her or any other “disqualified person”. A “disqualified person” is defined in IRC Section 4975 as the Plan owner and any of his or her lineal descendants, which include parents, children, spouse, daughter-in-laws, and son-in-laws. In addition, a “disqualified person” is not permitted to provide any services or receive any personal benefit from the Solo 401(k) Plan investment. Therefore, IRA Financial Group has specially designed a CPA tax service program for Solo 401(k) Plan investors. The specialized CPA service will offer special federal and state tax advice regarding real estate matters as well will cover federal and state tax reporting and filing obligations. Our specially designed Solo 401(k) Plan real estate CPA service will also offer clients that ability to work with our in-house CPAs to develop an internal accounting system that could keep track of all Solo 401(k) Plan related expenses and income in order to be in a position to properly value the Solo 401(k) Plan assets. The Solo 401(k) Plan real estate CPA service is designed to offer a Solo 401(k) Plan retirement investor with a more detailed accounting of the activities of the Solo 401(k) Plan and its investments.

The tax professionals and CPAs at the IRA Financial Group are committed to making sure your Solo 401(k) Plan solution remains in full IRS and ERISA compliance from establishment through investment.

For more information on IRA Financial Group’s in-house CPA services, please contact a Solo 401(k) Plan expert at 800-472-0646.

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Feb 24

Solo 401(k) Contribution Limits for 2015

Under the 2015 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $18,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $53,000, an increase of $1,000 from 2014.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $24,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $59,000, an increase of $1,500 from 2014.

One of the main benefits of a Solo 401(k) Plan is the opportunity to make higher contributions. Under most retirement plans that an owner only business could establish, the maximum annual deductible contribution is 25 percent of the business owner’s compensation.

Solo 401(k) Contributions Vs. SEP IRA

A Solo 401(k) Plan includes both an employee and profit sharing contribution option, whereas, a SEP IRA is purely a profit sharing plan. Hence, a participant in a SEP IRA would be limited to 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum of $53,000 for 2015. No employee deferral exists for a SEP IRA.

Employee Elective Deferrals

Before the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) became effective in 2002, there was no incentive for an owner-only business to establish a 401(k) plan because the business owner could generally receive the same benefits by adopting a profit sharing plan or SEP IRA. However, EGTRRA changed everything and turned the Solo 401(k) Plan in to the most popular retirement plan for the self-employed. EGTRRA cleared the way for an owner-only business to defer more money into a retirement plan and to operate a more cost-effective, less complex type of plan. One of the key features of EGTRRA was that it added the employee deferral feature founded in a traditional multiple employee 401(k) Plan to the Solo 401(k) Plan. This feature turned the Solo 401(k) Plan into the retirement vehicle that provided the highest contribution benefits to the self-employed.

For 2015, up to $18,000 per year can be contributed by the participant through employee elective deferrals. An additional $6,000 can be contributed for persons over age 50. These contributions can be up to 100% of the participant’s self-employment compensation.

Employer Profit Sharing Contributions

Through the role of employer, an additional contribution can be made to the plan in an amount up to 25% of the participant’s self-employment compensation (20% in the case of a Sole Proprietor or a Schedule C Tax Payer).

Total Limit

The sum of both contributions can be a maximum of $53,000 per year (for 2015) or $59,000 for persons over age 50.

If the business owner’s spouse elects to participate in the Solo 401(k) and earns compensation from the business, the spouse is allowed to make separate and equal contributions increasing the couples’ annual total contribution to $106,000 for 2015 or $118,000 if both spouses over age 50.

Solo 401k contributions are flexible. Both the salary deferral and the profit sharing contributions are optional and can be changed at any time based on business profitability.

A Solo 401k participant can contribute to the plan as an employee and as employer.

Calculate Your Solo 401k Plan Maximum Contribution Limit Please click here to calculate your Solo 401(k) Plan Maximum Contribution Limit.

Solo 401k Contribution Calculations

The calculation of how much can be contributed to a Solo 401k Plan is based on whether your business is taxed as a corporation and you receive a W-2 or if you are taxed as an LLC, partnership, or sole proprietorship.

C Corporation or S Corporation

Salary Deferral Contribution : In 2015, 100% of W-2 earnings up to the maximum of $18,000 or $24,000 if age 50 or older can be contributed to a Solo 401k.

Profit Sharing Contribution : Internal Revenue Code Section 401(a)(3) states that the amount of employer contributions is limited to 25 percent of the compensation paid. Accordingly, a profit sharing contribution up to 25% of W-2 earnings can be contributed into a Solo 401k. In other words, in the case of company, the employer profit sharing contribution must be based on the compensation paid by company not the overall profits earned by the company.

Multiple Member LLC or Partnership

Salary Deferral Contribution: In 2015, 100% of the owner’s self-employment earnings up to the maximum of $18,000 or $24,000 if age 50 or older can be contributed to a Solo 401k.

Profit Sharing Contribution : Internal Revenue Code Section 401(a)(3) states that the amount of employer contributions is limited to 25 percent of the entity’s overall self-employment earnings. In other words, the 25% employer contribution amount is based on the K-1 income attributable to self-employment earnings, not necessarily the overall income of the entity if income is attributable to passive types of investments not considered self-employment earnings (i.e. passive business income).

Single Member LLC or Sole Proprietorship

Salary Deferral Contribution: In 2015, 100% of the owner’s self employment earnings up to the maximum of $18,000 or $24,000 if age 50 or older can be contributed to a Solo 401k.

Profit Sharing Contribution : Internal Revenue Code Section 401(a)(3) states that the amount of employer contributions is limited to 25 percent of the entity’s income subject to self-employment tax . Single member LLCs or Schedule C sole-proprietors must do an added calculation starting with earned income to determine their maximum contribution, which, in effect, brings the maximum 25% of compensation limit down to 20% of earned income. A step-by-step worksheet for this calculation can be found in Pub 560. In general, compensation is your net earnings from self-employment. This definition takes into account both of the following items: (i) the deduction for one-half of your self-employment tax, and (ii) the deduction for contributions on your behalf to the plan.

Example 1: Joe, who is 35, is the sole owner of ABC, Inc. Joe receives $100,000 of compensation from the corporation. The maximum deductible contribution Joe can make to his Solo 401(k) account in 2015 would be a whopping $43,000 [$18,000 + (25% of $100,000)]. That’s a significant amount more than the amount Joe would be able to contribute to a traditional IRA or SEP IRA.

Example 2: Joe, who is 35, is a sole proprietor. Joe earns $100,000 from his sole proprietorship. For 2015, the maximum deductible contribution Joe can make to his Solo 401(k) account would be a whopping $38,000 [$18,000 + (20% of $100,000)]. That’s a significant amount more than the amount Joe would be able to contribute to a traditional IRA or SEP IRA.

Example 3: Joe, who is 42, is the owner of a single member LLC. Joe earns $100,000 from his LLC from self-employment earnings. For 2015, the maximum deductible contribution Joe can make to his Solo 401(k) account would be a whopping $38,000 [$18,000 + (20% of $100,000)]. That’s a significant amount more than the amount Joe would be able to contribute to a traditional IRA or SEP IRA.

Example 4: Joe, who is 55, is the sole owner of ABC, Inc. Joe receives $100,000 of compensation from the corporation. In 2015, the maximum deductible contribution Joe can make to his Solo 401(k) account would be a whopping $49,000 [$24,000 + (25% of $100,000)]. That’s a significant amount more than the amount Joe would be able to contribute to a traditional IRA or SEP IRA.

Example 5: Joe and Kim are married. Joe, who is 35, is the sole owner of ABC, Inc. Joe and Kim each receive $100,000 of compensation from the corporation. For 2015, the maximum deductible contribution Joe can make to his Solo 401(k) account would be $43,000 [$18,000 + (25% of $100,000)] and the maximum deductible contribution Kim can make to his Solo 401(k) account would be $43,000, for a total of a whopping $86,000.

Why Work With the IRA Financial Group?

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP. Over the years, we have helped thousands of clients establish IRS compliant Solo 401(k) Plans. With our work experience at some of the largest law firms in the country, our retirement tax professionals’ tax and ERISA knowledge in this area is unmatched.

To learn more about the Solo 401(k) Plan annual contribution rules, please contact one of our Solo 401(K) Plan experts at 800-472-0646 for more information.

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Feb 23

Myths Regarding the 401(k) Plan

In a recent article written by Rebecca Sheppard at Benzinga, she discusses five myths about 401(k) plans that should be ignored:

As with many things financial, myths surrounding retirement plans abound. In order to combat these sneaky, perpetuated falsities, it is primarily essential to understand how retirement plans work.

Saving for retirement involves much more than simply stashing away a few bucks every month into the savings account attached to your checking account. It can seem burdensome, but with proper cultivation, a designated retirement savings vehicle or two can make a huge impact on your later years.

Myth 1: 401(k)s Are The Same As IRAs

401(k) plans and Individual Retirement Accounts (IRAs) are both accounts that are set up to help an individual save for retirement. 401(k)s are offered by employers, while IRAs are opened by the participant.

  • Eligibility: Anyone with taxable income can set up an IRA. 401(k) plans are established through an employer and therefore cannot be set up outside of that environment.
  • Contributions: 401(k) contributions can be made by the participant and the employer, while IRA contributions are the responsibility of the account holder alone. Furthermore, IRA contributions are determined and limited by age and income.
  • Taxation: Depending on the type of IRA, the account may be tax-deferred (Traditional IRAs) or have tax-free growth (Roth IRAs). 401(k) plans are considered tax-deferred since contributions are made prior to taxes being taken out (from your salary) and then taxed upon withdrawal.
  • Withdrawals: Typically, once the account holder reaches retirement age, withdrawals from 401(k)s are penalty-free; they are, however, taxed. Before retirement, a penalty may be incurred for withdrawals. IRA withdrawal regulations depend on the type of IRA, but in general, withdrawals can be made at any point for qualified distributions penalty-free.

Myth 2: All 401(k) Plans Are The Same

While all 401(k) plans function similarly in that they are all retirement savings vehicles, not all plans follow the exact same formula. Some employers offer matching contributions for 401(k) plans; some offer a percentage match; some do not.

Insurance broker and W.H. Black & Company President William H. Black Jr. stated, “One of the biggest misconceptions in the 401(k) world is all plans are created equal. Nothing could be further from the truth. It is this misconception that is hurting plan sponsors and plan participants alike.”

Myth 3: If I Switch Jobs, My Old 401(k) Account Disappears

While 401(k) plans function as a dual investment between the participant (employee) and the offering party (employer), an employment change – either by termination or transfer to another job – does not eliminate the account or the accrued benefits. The account does not cease to exist once the offering party is no longer vested in the account.

That being said, the account cannot go on as it did before. After a job change or cease of offer (see Myth 4), the participant essentially has three options for how to proceed with the account.

  • Empty The Account: The participant can, with minimal penalties, withdraw all funds and close the account.
  • Transfer To A New Retirement Plan: If the participant switches jobs from one 401(k) provider to another, the account contents can be rolled over to the newly offered 401(k). If the participant does not wish to enroll in a new 401(k) or it is not offered, the savings can be rolled over into an Individual Retirement Account (IRA).
  • Leave It: Once the participant is 100 percent vested in the account, they can simply leave the account be and let it mature. A word of warning: This is not always feasible; depending on the amount in the account, the employer may have the option to automatically shift funds before they surrender their ownership percentage.

Myth 4: My Employer Offering The 401(k) Is Legally Bound To Keep Offering The Plan Once I Sign

Unfortunately, this is not the case. There are currently no federal or state regulations requiring employers to offer retirement plans of any sort, therefore employers can terminate their offered 401(k) plan. Furthermore, they can do this without your consent.

What is important to keep in mind, however, is that employees enrolled in 401(k) plans are protected by the virtue of how 401(k) plans are regulated. At termination, the employer must forfeit his percentage vested in all amassed benefits; the employee is then 100 percent vested in the account.

Myth 5: If I Contribute The Minimum Amount Annually, I Will Have Saved Enough For A Comfortable Retirement

Not necessarily. Many financial experts recommend upping your contributions annually. However, some annual contribution is better than none.

If you feel that you have not contributed enough over the years, there are resources to help restore balance and health to your retirement account. The IRS offers advice on how to avoid such mistakes and how to recover if oversights were made.

For more information, please contact one of our 401(k) Experts @ 800.472.0646 today!

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Feb 20

Eligibility Rules for a Solo 401(k)

A Solo 401(k) plan is well suited for businesses that either do not employ any employees or employee certain employees that may be excluded from coverage. A Solo 401K plan is perfect for any sole proprietor, consultant, or independent contractor.

To be eligible to benefit from the Solo 401(k) Plan, investors must meet just two eligibility requirements:

(i) The presence of self employment activity.

(ii) The absence of full-time employees.

Eligibility Rules for a Solo 401(k)The Presence of Self Employment Activity

Self employment activity generally includes ownership and operation of a sole proprietorship, Limited Liability Company (LLC), C Corporation, S Corporation, and Limited Partnership where the business intends to generate revenue for profit and make significant contributions to the plan.

Generate Revenue for Profit

There are no established thresholds for how much profit the business must generate, how much money must be contributed to the plan, or how soon profits and contributions must happen. It is generally believed that the IRS will consider you eligible if the business being conducted is a legitimate business that is run with the intention of generating profits. The self employment activity can be part time, and it can be ancillary to full time employment elsewhere. A person can even participate in an employer’s 401(k) plan in tandem with their own Roth 401(k). In such a case, the employee elective deferrals from both plans are subject to the single contribution limit.

The Absence of Full-Time Employees

Unlike a regular 401(k) plan, a solo 401(k) plan can be implemented only by self-employed individuals or small business owners who have no other full-time employees and are not employed by any business owned by them or their spouse (an exception applies if your full-time employee is your spouse). The business owner and their spouse are technically considered “owner-employees” rather than “employees”.

The following types of employees may be generally excluded from coverage:

  • Employees under 21 years of age
  • Employees that work less than a 1000 hours annually
  • Union employees
  • Nonresident alien employees

If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up.  However, a Solo 401K eligible business can have part time employees and independent contractors.

Please contact one of our Solo 401k Experts at 800-472-0646 for more information.

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Feb 19

Free Information Kit – The Business Funding Solution

Are you an entrepreneur having trouble getting financing for a new business?

Free Information Kit The Business Funding SolutionThe IRA Financial Group’s Business Acquisition Structure is your solution!

Use your retirement funds to purchase a new business or franchise tax free and without penalty!

Earn a reasonable salary from your new business!

It’s 100% IRS compliant.

Sign up now for our free information kit to learn how the Business Funding Solution can allow you to purchase a business or franchise tax-free and without penalty!  Click here to sign up!

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Feb 17

Using Your Solo 401k Plan to Purchase Real Estate

Most people mistakenly believe that their 401(k) must be invested in bank CDs, the stock market, or mutual funds. Few Investors realize that the IRS has always permitted real estate to be held inside 401(k) retirement accounts. Investments in real estate with a Solo 401(k) are fully permissible under the Employee Retirement Income Security Act of 1974 (ERISA). IRS rules permit you to engage in almost any type of real estate investment, aside generally from any investment involving a disqualified person.

Advantages of Using a Solo 401(k) to Purchase Real Estate

Income or gains generated by a 401(k) Plan generate tax-deferred/tax-free profits. Using a Solo 401(k) Plan to purchase real estate allows Using a Solo 401(k) To Purchase Real Estatethe 401(k) to earn tax-free income/gains and pay taxes at a future date, rather than in the year the investment produces income.

With a Solo 401K, you can invest tax-free and not have to pay taxes right away – or in most cases for many years allowing your retirement funds to grow tax-free! All the income or gains from your real estate deals flow though to your 401(k) account tax-free!

Types of Real Estate Investments

Below is a partial list of domestic or foreign real estate-related investments that you can make with a Solo 401(k):

  • Raw land
  • Residential homes
  • Commercial property
  • Apartments
  • Duplexes
  • Condos/townhomes
  • Mobile homes
  • Real estate notes
  • Real estate purchase options
  • Tax liens certificates
  • Tax deeds

Investing in Real Estate with a Solo 401(k) is Quick & Easy!

Purchasing real estate with a Solo 401(k) Plan is essentially the same as purchasing real estate personally.

  • Set-up a Solo 401(k) Plan with the IRA Financial Group.
  • Identify the investment property.
  • Purchase the investment property with the Solo 401(k) Plan – no need to seek the consent of the custodian with a Solo 401(k) Plan since you serve as Trustee and Plan Administrator.
  • Title to the investment property and all transaction documents should be in the name of the Solo 401(k) Plan. Documents pertaining to the property investment must be signed by you as Trustee.
  • All expenses paid from the investment property go through the Solo 401(k) Plan. Likewise, all rental income checks must be deposited directly in to the Solo 401(k) Plan bank account. No 401(k) related investment checks should be deposited into your personal accounts.
  • All income or gains from the investment flow through to your 401(k) tax-free!

Solo 401K Solution

Structuring the Purchase of Real Estate with a Solo 401(k) Plan

When using a Solo 401(k) to make a real estate investment there are a number of ways you can structure the transaction:

1. Use your Solo 401(k) funds to make 100% of the investment

If you have enough funds in your Solo 401(k) to cover the entire real estate purchase, including closing costs, taxes, fees, insurance, you may make the purchase outright using your Solo 401(k). All ongoing expenses relating to the real estate investment must be paid out of your Solo 401(k) bank account. In addition, all income or gains relating to your real estate investment must be returned to your Solo 401(k) bank account.

2. Partner with Family, Friends, Colleagues

If you don’t have sufficient funds in your Solo 401(k) to make a real estate purchase outright, your Solo 401(k) can purchase an interest in the property along with a family member (non-disqualified person), friend, or colleague. The investment would not be made into an entity owned by the 401(k) owner, but instead would be invested directly into the property.

For example, your Solo 401(k) Plan could partner with a family member, friend, or colleague to purchase a piece of property for $150,000. Your Solo 401(k) Plan could purchase an interest in the property (i.e. 50% for $75,000) and your family member, friend, or colleague could purchase the remaining interest (i.e. 50% for $75,000).

All income or gain from the property would be allocated to the parties in relation to their percentage of ownership in the property. Likewise, all property expenses must be paid in relation to the parties’ percentage of ownership in the property. Based on the above example, for a $2,000 property tax bill, the Solo 401(k) would be responsible for 50% of the bill ($1000) and the family member, friend, or colleague would be responsible for the remaining $1000 (50%).

Isn’t Partnering with a family member in a Real Estate Transaction a Prohibited Transaction?

Likely not if the transaction is structured correctly. Investing in an investment entity with a family member and investing in an investment property directly are two different transaction structures that impact whether the transaction will be prohibited under Code Section 4975. The different tax treatment is based on who currently owns the investment. Using a Solo 401(k) Plan to invest in an entity that is owned by a family member who is a disqualified person will likely be treated as a prohibited transaction. However, partnering with a family member that is a non-disqualified person directly into an investment property would likely not be a prohibited transaction. Note: If you, a family member, or other disqualified person already owns a property, then investing in that property with your Solo 401(k) would be prohibited.

3. Borrow Money for your Solo 401(k)

You may obtain financing through a loan or mortgage to finance a real estate purchase using a Solo 401(k). Solo 401(k) participants can also borrow up to either $50,000 or 50% of their account value – whichever is less to help finance a real estate investment.

If using financing through a third-party loan to purchase real estate (other than a loan from the 401(k) Plan), one important point must be considered when selecting this option:

  • Loan must be non-recourse – A “prohibited transaction” is a transaction that, directly or indirectly involves the loan of money or other extension of credit between a plan and a disqualified person. Normally, when an individual purchases real estate with a mortgage, the traditional loan provides for recourse against the borrower (i.e., personal liability for the mortgage). However, if the 401(k) Plan purchases real estate and secures a mortgage for the purchase, the loan must be non-recourse; otherwise there will be a prohibited transaction. A non-recourse loan only uses the property for collateral. In the event of default, the lender can collect only the property and cannot go after the 401(k) Plan itself.

Note: Unlike a Self-Directed IRA LLC, pursuant to Internal Revenue Code Section 514(c)(9), in the case of a Solo 401(k) Plan, the Unrelated Business Income Tax (UBTI) does not apply when using nonrecourse leverage as part of a real estate transaction (unrelated debt-financed income – UDFI). Therefore, unlike a Self-Directed IRA LLC, using a Solo 401K to finance a real estate investment will not trigger UBTI – which imposes a tax in the range of 40% for 2015 on all income/gains relating to the debt financed portion of the investment.

To learn more about using a Solo 401(k) Plan to invest in real estate, please contact one of our Solo 401(k) Plan Experts at 800-472-0646 for more information.

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Feb 16

Learn How to Buy a Business with Your 401k Tax-Free!

The legality of using retirement funds to purchase employer corporate stock is firmly established in the Internal Revenue Code and under ERISA law. The IRA Financial Group’s in-house retirement tax professionals have spent the last two years developing an IRS and ERISA compliant structure for using retirement funds to acquire or invest in a business tax-free! Because the IRS has stressed the importance of compliance when using retirement funds to purchase a business, it is crucial to work with a company that is operated by a team of in-house tax and ERISA professionals who have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP to ensure the structure satisfies IRS and ERISA rules and procedures. The retirement tax professionals at the IRA Financial Group have developed a process that ensures speed and compliance, by using standardized procedures that work via phone, e-mail, fax, and mail. Your funds will be ready for investment into your new or existing business within 14-21 days.

Step 1 – Establishment of New Corporation

IRA Financial Group’s in-house tax and ERISA professionals will establish a corporation and ensure that the incorporation process is completed accurately in accordance with state law. Our in-house retirement tax professionals have significant experience with the incorporation process in all 50 states and the District of Columbia. Your corporation will be incorporated in the State where you will conduct business or in multiple states if the business will be conducted in more than one state. The IRA Financial Group’s retirement tax professionals will assist you in satisfying all internal corporate formalities, such as establishing a board of directors, appointing officers, and completing the corporate resolution and minutes. Upon the incorporation of the entity, our in-house retirement tax professionals will acquire an Employer Tax ID Number with the IRS for your new corporation.

Learn How to Buy a Business with Your 401k Tax-Free!Step 2 – New Corporation Adopts 401(k) Plan

The IRA Financial Group’s in-house ERISA professionals will establish an IRS approved 401(k) Plan for your new corporation. Plan documents will be drafted so that the new corporation will be the sponsor of the new 401(k) Plan. The Plan documents will appoint the new business owner as the trustee of the plan and will be customized based on the financial goals of you and the business. The Plan will be specifically drafted to allow for investment in your new corporation.

Step 3 – Rollover/Transfer of Funds to your New Corporation

The IRA Financial group’s in-house ERISA professionals will guide you through the process of opening a bank account for your new 401(k) Plan (the account can be opened at any local bank, credit union, or financial institution) as well as helping you complete the necessary transfer/rollover documents to transfer your retirement funds from your previous employer or IRA to your company’s new 401(k) Plan tax-free. Our in-house ERISA professionals will guide you through the entire rollover/transfer process so your retirement funds will be transferred to your new 401(k) Plan in an expedited and tax-free manner.

Step 4 – 401(k) Plan Invests in the new Corporation

The IRA Financial Group’s in-house retirement tax professionals will draft a customized stock purchase agreement detailing the 401(k) Plan’s purchase of new company stock. The IRA Financial Group will coordinate with the selected independent business appraisal to assure that the stock purchase agreement is in compliance with IRS and ERISA rules. Once the 401(k) Plan has purchased stock in the new corporation, the corporation will have the funds to purchase new business assets or help grow the business.

Step 5 – Compliance with IRS and ERISA Rules

Once your retirement funds have been invested in your new business, the retirement tax professionals at the IRA Financial Group will continue to work with you to ensure that the structure remains compliant with IRS and ERISA rules and procedures. In the case of a corporation with employees, the IRA Financial Group will work with a third-party administrator to ensure that the Plan remains compliant so that the structure continues to meet IRS and ERISA rules and requirements.

Work Directly with our on-site tax and ERISA professionals!

Each client of the IRA Financial Group is assigned an individual retirement tax professional who will customize a structure that satisfies his or her financial and retirement needs while ensuring the structure is developed in full IRS & ERISA compliance!

We have developed a process that ensures speed and compliance, by using standardized procedures that work via phone, e-mail, fax, and mail. Your funds will be ready for investment into your new or existing business within 14-21 days.

Contact us today at 800-472-0646 to learn more about how you can use your retirement funds to start a new business or grow an existing business tax-free, in full IRS compliance, and without penalties!

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Feb 13

Contribution Deadlines for Your Solo 401(k)

The deadline for making Solo 401K Plan contributions is typically dependent on the type of entity that has adopted the Solo 401K Plan as well as the type of contribution – employee deferral vs. profit sharing contribution.

Sole Proprietorship

Employee Deferral

In the case of a sole proprietorship, a business owner under the age of 50 may make employee deferral contributions up to $18,000 for 2015 (an employee over the age of 50 may make a $6,000 annual catch-up contribution for an annual deferral contribution imitation of $24,000). An Employee must elect to make the employee deferral contribution by December 31 of the year. However, the employer deferral contribution can be made up until the tax-filing deadline.

The employee deferral contribution can be made using pre-tax and/or after-tax (Roth) funds.

Profit Sharing Contribution

The sole proprietorship business may make annual profit sharing contributions for the business owner and spouse annually. Internal Revenue Code Section 401(a)(3) states that the amount of employer contributions is limited to 25 percent of the entity’s income subject to self-employment tax. Schedule C sole-proprietors must do an added calculation starting with earned income to determine their maximum contribution, which, in effect, brings the maximum 25% of compensation limit down to 20% of earned income. A step-by-step worksheet for this calculation can be found in IRS Publication 560. In general, compensation is your net earnings from self-employment. This definition takes into account both of the following items: (i) the deduction for one-half of your self-employment tax, and (ii) the deduction for contributions on your behalf to the plan.

The profit sharing contribution must be made by the business’s tax-filing deadline.

Single Member LLC

Employee Deferral

In the case of a single member LLC, the single member LLC owner under the age of age 50 may make employee deferral contributions up to $18,000 for 2015 (an employee over the age of 50 may make a $6,000 annual catch-up contribution for an annual deferral contribution limitation of $24,000). The single member LLC owner must elect to make the employee deferral contribution by December 31 of the year. However, the employer deferral contribution can be made up until the tax-filing deadline.

The employee deferral contribution can be made using pre-tax and/or after-tax (Roth) funds.

Profit Sharing Contribution

The single Member LLC business may make annual profit sharing contributions for the business owner and spouse annually. Internal Revenue Code Section 401(a)(3) states that the amount of employer contributions is limited to 25 percent of the entity’s income subject to self- employment tax. Schedule C single member LLC owners must do an added calculation starting with earned income to determine their maximum contribution, which, in effect, brings the maximum 25% of compensation limit down to 20% of earned income. A step-by-step worksheet for this calculation can be found in IRS Publication 560. In general, compensation is your net earnings from self-employment. This definition takes into account both of the following items: (i) the deduction for one-half of your self-employment tax, and (ii) the deduction for contributions on your behalf to the plan.

Profit-sharing contributions must be funded by the business’s tax-filing deadline.

Multiple-Member LLC

Employee Deferral

In the case of a multiple member LLC, the multiple-member LLC owners under the age of age 50 may make employee deferral contributions up to $18,000 for 2015 (an employee over the age of 50 may make a $6,000 annual catch-up contribution for an annual deferral contribution limitation of $24,000). The multiple-member LLC owners must elect to make the employee deferral contribution by December 31 of the year. However, the employee deferral contribution can be made up until the tax-filing deadline.

The employee deferral contribution can be made using pre-tax and/or after-tax (Roth) funds.

Profit Sharing Contribution

The multiple-member LLC business may make annual profit sharing contributions for the business owners annually. Internal Revenue Code Section 401(a)(3) states that the amount of employer profit sharing contributions is limited to 25 percent of the entity’s income subject to self-employment tax. Profit-sharing contributions must be funded by the business’s tax-filing deadline.

C Corporation & S Corporation

Employee Deferral

An employee of a corporation will receive a W-2. When it comes to making employee deferral contributions, the employee must make the deferral contribution during the year. The timing of the deferral contribution will typically depend on the business. In the case of a corporation that uses a payroll company, the employee deferral will typically be deducted from the employee’s paycheck. If the company does not use a payroll system, the employee can elect to make deferral contributions at anytime during the year. Once the election is made the Department of Labor safe harbor is that the funds are deposited into the Solo 401(k) Plan account within 7 days. The employee making the employee contribution should make sure that he or she has earned enough compensation during the pay period to cover the employee contribution. For example, if the employee wishes to make a employee deferral contribution of $18,000 on December 30th, the employee will need to be sure that he or she has earned sufficient compensation during the pay period to cover the deferral contribution.

The employee deferral contribution can be made using pre-tax and/or after-tax (Roth) funds.

Profit Sharing Contributions

The corporation may make profit sharing contributions for corporation’s owner(s)/employee(s) annually. Internal Revenue Code Section 401(a)(3) states that the amount of employer profit sharing contributions is limited to 25 percent of the entity’s income subject to self-employment tax.

Profit-sharing contributions must be funded by the business’s tax-filing deadline.

Please contact one of our Solo 401k Experts at 800-472-0646 for more information.

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Feb 11

New Podcast Talks About the Advantages of the Roth Solo 401k and Real Estate Investing

In our latest podcast, Adam Bergman discusses the advantages of using a Roth Solo 401(k) to invest in real estate.  Check it out here or find us on iTunes!

IRA Financial Group on iTunesIf you have any questions, please feel free to contact us @ 800.472.0646!

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Feb 10

Checkbook Control Advantage with Your Solo 401k Plan

A Solo 401(k) is perfect for sole proprietors, small businesses and independent contractors.

A Solo 401(k) plan is generally also referred to as a “checkbook control” Qualified Retirement Plan. In each case, a 401(k) plan is established whereby the participant serves as trustee and administrator of the Plan providing the participant with “checkbook control” over his or her retirement funds.

With a “checkbook control” Solo 401(K) Plan you will never have to seek the consent of a custodian to make an investment or be subject to excessive custodian account fees based on account value and per transaction.

By having “checkbook control” over your retirement funds you will gain the following advantages:

“Checkbook Control”: You’ll no longer have to get each investment approved by the custodian of your account. Instead, all decisions are truly yours. To make an investment, simply write a check and use the funds straight from your Solo 401(k) Plan bank account.

When making a real estate investment or purchasing tax liens, a “checkbook control” Solo 401(k) Plan, will allow you as manager of the LLC the ability to simply write a check from your Solo 401(k) Plan bank account.

Example 1: Joe has a Solo 401(k) set-up by the IRA Financial Group. Joe has established his Solo 401(k) Plan bank account with Bank of America. Joe wishes to use his retirement funds to purchase a home from Steve, an unrelated third-party (non-disqualified person). Steve is anxious to close the transaction as soon as possible. With a “checkbook control” Solo 401(k) Plan, Joe can simply write a check using the funds from his 401(k) Plan bank account or can wire the funds directly from the account to Steve. Joe, as trustee of the plan, no longer needs to seek the consent of the custodian before making the real estate purchase. With a custodian controlled Solo 401(k) Plan without “checkbook control” Joe may not be able to make the real estate purchase since seeking custodian approval would likely take too much time.

Example 2: Joe has a Solo 401(k) set-up by the IRA Financial Group. Joe has established his Solo 401(k) Plan bank account with Bank of America. Joe wishes to use his retirement funds to invest in tax lien certificates via auction. Purchasing tax lien certificates requires Joe make the payment at the auction. With a “checkbook control” Solo 401(k) Plan, Joe can simply bring his 401(k) Plan bank account checkbook to the closing or secure a certified check from the bank in order to make payments at the auction. With a custodian controlled Solo 401(k) Plan without “checkbook control” Joe would not be able to make tax lien certificate investments because he would need custodian approval before each tax lien certificate purchase and would not have sufficient time to seek the consent of the custodian.

No Custodian Fees or Transaction Fees: The most significant cost benefit of the Solo 401(k) plan is that it does not require the participant to hire a bank or trust company to serve as trustee. In other words, there are no custodian fees or transaction fees when establishing a Solo 401(k) Plan with the IRA Financial Group. This flexibility allows the participant to serve in the trustee role. This means that all assets of the 401(k) trust are under the sole authority of the Solo 401k participant.  A Solo 401(k) plan allows you to eliminate the expense and delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

Speed: You can act quickly on a great investment opportunity. When you find an investment that you want to make with your retirement funds, simply write a check or wire the funds straight from your Solo 401(k) Plan bank account to make the investment. The Solo 401(k) Plan allows you to eliminate the delays associated with using an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

Offset the Cost of Your Plan with a Tax Deduction: By paying for your Solo 401(k) with business funds, you would be eligible to claim a deduction for the cost of the plan, including annual maintenance fees. The deduction for the cost associated with the Solo 401(k) Plan and ongoing maintenance will help reduce your business’s income tax liability, which will in-turn offset the cost of adopting a self-directed Solo 401(k) Plan. The retirement tax professionals at the IRA Financial Group will help you take advantage of the available business tax deduction for adopting a Solo 401(k) Plan.

Cost Effective Administration: In general, the solo 401(k) plan is easy to operate. There is generally no annual filing requirement unless your Solo 401K plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500-EZ).

Solo 401k Solution

For more information, please contact a Solo 401(k) Expert @ 800.472.0646 today!

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