Mar 31

IRA Financial Group Services When Using Your 401k to Start a Business

The IRA Financial Group was founded by a group of top law firm tax and ERISA professionals who have worked at some of the largest law firms in the country, including White & Case LLP and Dewey & LeBoeuf LLP.

In developing our Business Acquisition & Compliance Solution Structure (“BACSS”), similar to the IRS-approved ROBS solution, our in-house retirement tax professionals have carefully examined and researched IRS and Department of Labor guidance to design a structure that is fully compliant with IRS and ERISA rules. Each client of the IRA Financial Group is assigned an individual retirement tax professional who will help customize a structure that satisfies his or her financial and retirement needs while ensuring the structure is developed in full compliance with IRS and ERISA rules and requirements. Our services include:

  • Establishment of “C” Corporation including Filing Fees;
  • Filing LLC Articles of Incorporation with the state;
  • Application for Corporation EIN;
  • Drafting all required initial corporate resolutions and minutes;
  • Drafting of customized Stock Purchase Agreement;
  • Drafting of customized Employee Stock Purchase Agreement;
  • Free consultation with in-house retirement tax professional on the BACSS structure;
  • Adoption of 401(k) Plan;
  • Basic Plan Document;
  • EGTRRA Amendment;
  • Summary Plan Description;
  • Trust Agreement;
  • Appointment of Trustee;
  • Beneficiary Designation;
  • Application for Plan trust EIN;
  • Assistance in the establishment of business and 401(k) Plan bank accounts;
  • Assistance with the transfer of funds to your new 401(k) Plan bank account;
  • Assistance in coordinating the completion of all IRS required information returns
  • Assistance in coordinating the acquisition of an independent business appraisal;
  • Free consultation with in-house retirement tax professional on the BACSS structure;
  • Tax support on the BACSS and the 401(K) Plan; and
  • Annual compliance review

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 typically be ready for investment into your new or existing business within 14-21 days.

Please contact one of our Retirement Experts at 800-472-0646 for more information.

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Mar 30

Do You Have to Pay UBTI Tax on Unrelated Debt Financed Income in a Solo 401(k) Plan?

No. Unlike a Self Directed IRA LLC, when a Solo 401K Plan uses nonrecourse leverage to purchase real estate that is leveraged, it is exempt from paying any Unrelated Business Taxable Income (UBTI) tax on the income or gain generated.

When an IRA buys real estate that is leveraged with mortgage financing, it creates Unrelated Debt Financed Income (a type of Unrelated Business Taxable Income) on which taxes must be paid. A Solo 401(k) plan is exempt from UDFI pursuant to Internal Revenue Code Section 514(c)(9).

With the UBTI tax rates at approximately 40% for 2017, the Solo 401(k) Plan offers real estate investors looking to use nonrecourse leverage in a transaction with a tax efficient solution.

Debt-financed property refers to borrowing money to purchase the real estate (i.e., a leveraged asset that is held to produce income). In such cases, only the income attributable to the financed portion of the property is taxed; gain on the profit from the sale of the leveraged assets is also UDFI (unless the debt is paid off more than 12 months before the property is sold).

Why does this Exemption Apply to 401(k) Plans and Not IRAs?

When Internal Revenue Code Section 514(c)(9) was enacted in 1980, it applied only to qualified pension, profit sharing, and stock bonus plans, but its scope was broadened in 1984 to include schools, colleges, and universities. The provision brings the history of Internal Revenue Code Section 514 full circle by exempting some organizations, such as 401(k) Qualified Plan, from tax on income from the very sort of leveraged real estate deals that provoked the enactment of the predecessor of Internal Revenue Code Section 514 in 1950. As per the legislative history, the only reason given in the committee reports for the exemption is that some people wanted it: “Trustees of these plans are desirous of investing in real estate for diversification and to offset inflation. Debt-financing is common in real estate investments.”

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

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Mar 28

Avoiding Required Minimum Distribution Rules With A Roth 401(k) Plan

Here’s another article from Forbes by our own Adam Bergman –

In the case of a 401(k) qualified retirement plan, when one reaches the age of 70 1/2, a 401(k) plan participant generally is required to start taking taxable withdrawals, also known as required minimum distributions (“RMDs”) from their 401(k) plan.  The same RMD rules apply to pre-tax IRAs, SIMPLE IRAs and SEP IRAs.  However, Roth IRAs, which consists of after-tax contributions and which can generate tax-free returns, do not require RMDs until after the death of the owner or his/her spouse. This exception to the RMD rules for Roth IRAs allow for some tax planning opportunities.

Avoiding Required Minimum Distribution Rules With A Roth 401(k) PlanNot all employer sponsored 401(k) plans offer a Roth component.  For employer sponsored 401(k) plans that offer a Roth option, eligible employees generally have the option to make pre-tax as well as Roth employee deferral contributions. Under 401(k) plan rules, a plan participant who reached the age of 70 1/2 would be required to take RMDs on both the pre-tax and Roth amounts. RMDs are the minimum amount one must withdraw from the retirement account each year.  RMD withdrawals will be included in the plan participant’s taxable income except for any part that was taxed before (basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

The RMD amount for any given year is the total account balance in the retirement account as of the end of the immediately preceding calendar year (12/31) divided by a distribution period as set forth by the IRS each year. Accordingly, if a plan participant nearing or over the age of 70 1/2 has a Roth 401(k) account in a 401(k) plan, the individual can directly rollover the Roth funds to a Roth IRA tax-free prior to 12/31 leaving the Roth 401(k) account with a zero balance and, thus, avoiding the RMD rules since a Roth IRA is not subject to the RMD rules.

For example, Jen is sixty-nine years old and has $185,000 in her employer sponsored Roth 401(k) plan.  If Jen left the Roth 401(k) funds in the 401(k) plan she would become subject to the RMD rules at 70 1/2.  However, if Jen elected to directly rollover the Roth 401(k) plan funds tax-free into a Roth IRA prior to 12/31, she would be able to avoid the RMD rules and, thus, gain the opportunity to continue increasing the value of the Roth account without having to take yearly withdrawals.

For a participant in an employer sponsored 401(k) plan who has a Roth account and is nearing or over the age of 70 1/2, understanding the Roth 401(k) and Roth IRA RMD rules and exceptions could help further advance the overall value of the Roth account as well as offer some potentially valuable estate planning opportunities.

For more information about the Roth 401(k), please contact us @ 800.472.0646.

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Mar 23

How to Fill Out IRS Form 5500-EZ with a Solo 401k

In general, the solo 401(k) plan is easy to operate. There is generally no annual filing requirement unless the fair market value of your solo 401(k) plan asset exceeds $250,000, as of December 31 of the previous year. If your solo 401(k) plan assets exceed $250,000 as of 12/31 of the previous year, you will need to file a short information return with the IRS (Form 5500-EZ). In such a case, the Solo 401(k) Plan participant will need to file a short information return with the IRS (Form 5500-EZ). The IRS Form 5500-EZ is due on July 31 and is filed in paper form.

Please click here to download a PDF with the most updated instructions for the 2016 tax year. It also has more details not listed here at the end of the document, including Forms 5500, 5500-SF, and 5500-EZ Codes for Principal Business Activity.

Need the 5500-EZ form?

Please click here to download the 5500-EZ form from the IRS website.

Helpful instructions are listed below…

IRS FORM 5500-EZ

HOW TO REPORT THE FAIR MARKET VALUE OF ASSETS HELD BY YOUR SOLO 401K PLAN TO THE IRS

The Internal Revenue Service (“IRS”) Form 5500-EZ is an annual information return that is required to be filed by every “One-Participant Plan” (owners and their spouses), also known as a Solo 401(k) Plan, with plan asset value in excess of $250,000 as of December 31 of the previous tax year. The purpose of filing and reporting the fair market value (“FMV”) of your solo 401(k) plan’s assets is to inform the IRS of assets over $250,000.00 annually held in a Solo 401(k) Plan. You must file the Form 5500-EZ if a plan meets the requirements alone or combined with any other qualified retirement plan owned greater than 80% by the business owner or a related party (one controlled group) exceeding $250,000.00.

You do not have to file the form 5500-EZ for a plan year for a one-participant plan if the total of the plan’s assets and the assets of all other one-participant plans maintained by the employer at the end of the plan year does not exceed $250,000.00, unless the current year is the final plan year of the plan.

FILING TIPS:

  • The Form 5500-EZ is due every July 31st of the next plan year. Ex: for a plan that was established in or before 2016, the IRS Form 5500-EZ is due by July 31 st , 2017. If the filling date falls on a Saturday, Sunday, or legal holiday it may be filed on the next day that is not.
  • The Form 5500-EZ must be filed as a hard copy and sent directly to the IRS at the following address:

Department of the Treasury

Internal Revenue Service

Ogden, UT 84201-0020

  • To file the Form 5500-EZ using a private delivery service, you must use the approved IRS Designated providers (PDS) as follows:
  • DHL Express (DHL): Same Day Service. Federal Express (FedEx): Priority Overnight, Standard Overnight, FedEx 2 Day, FedEx International Priority and FedEx International First. United Parcel Service (UPS): UPS Next Day Air, UPS Net Day Air Saver, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

The Private delivery services should use the following address:

Internal Revenue Service

1973 Rulon White Blvd.

Ogden, UT 84404

  • The Form 5500-EZ cannot be e-filed electronically.
  • The Plan Administrator or employer (owner) must use the official printed paper Form 5500-EZ obtained from the IRS, and use blue or black ink for a wet signature. NO ELECTRONIC SIGNATURE ALLOWED. Print, sign and date before mailing.
  • Do not use a felt tip pen or other inks that bleed through, the other side should be blank.
  • Do not use arrows or make notes on the Form 5500-EZ and only enter information in the specific fields provided. Abbreviate if necessary.
  • Do not include schedules or attachments. However, you should retain them for your records.

PENALTIES:

The Internal Revenue Code imposes a penalty of $25 a day (up to $15,000).

COMPLETING THE IRS FORM 5500-EZ

It is important to work with a tax professional when completing the IRS Form 5500-EZ. When working with the IRA Financial Group, our tax professionals and CPAs will help you complete and file the IRS Form 5500-EZ if your plan has assets valued at $250,000 or above as of December 31 of the previous year.

PART I – Annual Return identification Information:

Enter the beginning date of the plan and then the ending date.

A) Check (1) for the first return filed for the plan. If this is not the first year filing then leave this unchecked.

B) Typically, do not check this box unless filed Form 5558 for an extension of time.

C) Typically, do not check this box unless this plan is maintained outside the United States.

PART II – Basic Plan Information:

1a) Enter the name of the plan as it appears on the EIN letter from the IRS: ABC CONSULTING 401K TRUST.

1b) Enter the numbers 001 for this year and every year’s future fillings use the same number. Note – if this plan will be amending an existing solo 401(k) Plan, you will need to include the appropriate 3 digit code (i.e. 002), which can be found in the plan Adoption Agreement.

1c) The date the plan became effective is found in Section One of your Adoption Agreement.

2a) Enter the name of the Adopting Employer:

ABC Consulting LLC

dba or c/o if applicable

1234 Ginger Street
(P.O. Box ONLY if USPS does not deliver).
Family, FL 55555

2b) Enter the Adopting Employer EIN XX-XXXXXXX no SS#. If plan is under a Sole Proprietor, YOU MUST OBTAIN AN EIN FROM THE IRS by completing the online application:

Apply for an EIN

Alternatively, you can acquire an EIN by preparing and faxing the Form SS-4 to the IRS at I-800-829-3676 then call 1-800-829-4933 to receive your EIN by phone. The EIN is issued immediately once the application information is validated.

2c) Enter the Adopting Employer telephone number: 888-888-8888.

2d) Enter the 6 digit applicable code XXXXXX that best describes the nature of the plan sponsors business from the list of principal business activity codes included at the end of these instructions.

3a) Enter the Plan Administrator information OPTIONAL. If preparer is the same as above, enter the same information.

3b) Enter and repeat the same EIN XX-XXXXXXX number as listed in 2b.

3c) Enter the Plan Administrator telephone number: 888-888-8888.

4a) Enter the name of the Trust: ABC CONSULTING 401K TRUST.

4b) Enter the EIN number as it appears on the EIN letter from the IRS: XX-XXXXXXX.

5a), 5b) and 5c) is not required if no changes were made to the plan.

6a) Enter the total number of participants at the beginning of the year. If solo 401K plan: Ex: 1 participant. Note – if the plan will include the spouse of a participant or a second business owner, then the appropriate number would need to be included (i.e. 2).

6b) Enter the total number of participants at the end of the plan year. If solo 401K plan: Ex: 1 participant. Note – if the plan will include the spouse of a participant or a second business owner, then the appropriate number would need to be included (i.e. 2).

PART III – Financial Information:

7a(1) Enter the “Total Plan Assets” or the same amount in 7a(2) from last year; if filed Form 5500-EZ previously. Otherwise, this figure includes “Total Plan Assets” as: rollovers, unrealized gains and losses such as appreciation/depreciation in assets. It also includes specific assets held by the plan at any time during the plan year (for example, partnership/joint venture interests, employer real property, real estate (other than employer real property), employer securities, loans (participants and non-participant loans), and tangible personal property). Please do not include contributions.

7a(2) Enter end of year “Total Plan Assets” as listed above. Please do not include contributions. NOTE: “Total Plan Assets” should include the amount of any liabilities, including , for example, mortgages.

7b(1) Enter “Total plan liabilities” to include but are not limited to benefit claims payable, operating payables, acquisition indebtedness (i.e. nonrecourse loan) and other liabilities. Do not include the value of future distributions what will be made to participants.

7b(2) Enter end of year “Total plan liabilities” as listed above.

7c(1) Enter “Net plan assets” the sum of by subtracting 7b(1) from 7a(1).

7c(2) Enter end of the year “Net plan assets” sum of by subtracting 7b(2) from 7a (2).

8a) and 8b) Enter total cash contributions received and/or receivable from employer and participants during the plan year.

8c) Enter all contributions including rollovers received from other plans valued on the date of contribution.

PART IV – Plan Characteristics:

9) Enter the applicable two-character feature Codes. In most cased, the following codes would be used: 2E, 2J, 3B, 3D. Note, if your plan assets are held in a brokerage account, then you would want to include 2R.

PART V – Compliance and Funding Questions:

10) Check YES if any of the participants entered into a loan from the plan and the amount or NO if not applicable.

11) Check NO.

11a) Enter N/A for amount.

12) Check NO.

DO NOT complete any information for 13) , 14) and 15). They are optional and are not required in this year’s filing.

IRA Financial Group offers all of its Solo 401(k) Plan clients the service of completing the IRS Form 5500-EZ for no additional fee. We want to make sure our solo 401(k) Plan clients that are required to file an IRS Form 5500-EZ are getting the necessary support they need to make sure the form is completed properly. All solo 401(k) plan clients required to file the IRS Form 5500-EZ will work our in-house CPAs to help prepare and file the IRS Form 5500-EZ.

For additional instructions on completing the IRS Form please contact the IRS Help Line at 1-877-829-5500 or one of our Solo 401(k) Experts @ 800.472.0646.

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Mar 21

Using a Solo 401k to Invest in Real Estate in the Reno, NV Area

Do you live in or around the Reno, NV area? Are you looking to invest in real estate? Did you know you can use your retirement funds to invest in almost anything, including real estate, tax free? If you currently have a retirement plan at a traditional financial institution, you may not know this. That’s because they want to push the investments they’re familiar with, such as stocks, bonds and mutual funds. With an IRA Financial Group Solo 401(k) Plan, you can invest in almost anything without the consent of your custodian. Further, with checkbook control, you can make an investment by simply writing a check. Now is the time to invest in the Reno area. In a recent client survey, Reno ranked near the top for real estate investments. Continue reading to see how to use your retirement funds to invest.

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 the 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 2016 on all income/gains relating to the debt financed portion of the investment.

For more information about using your 401(k) to invest in real estate in Reno, please contact a 401(k) Expert at the IRA Financial Group @ 800.472.0646.

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Mar 17

IRA Financial Group Vs. Vanguard Solo 401k Plan

The Solo 401K Plan, also known as the Individual 401K or Self Directed 401K Plan is an IRS approved plan that was designed specifically for the self-employed or small business owner with no employees other than the owners(s). Since the adoption of the 2002 Economic Growth and Tax Reconciliation Act, the Solo 401K Plan has become the most popular retirement plan for the self-employed.

When it comes to deciding what type of Solo 401K plan is best for you and your business, it is important to look at all the options the plan provides to make sure it will satisfy your retirement planning, tax, and investment goals.

IRA Financial Group Vs. Vanguard Solo 401k PlanMost banks and financial institutions, such as Vanguard offer Solo 401K Plans. The Solo 401K Plans are typically quite restrictive and only permit the plan participant to make limited investments without benefiting from most of the available IRS approved options such as the tax-free loan and Roth contributions. However, if you do not want to be forced to invest all your hard earn retirement savings in the stock market, than the Vanguard Solo 401K Plans may end up not being very attractive.  In addition, the Vanguard Solo 401K Plans will not offer a loan feature or allow you to make Roth Type contributions.

IRA Financial Group’s Solo 401K plan is unique and so popular because it is designed explicitly for small, owner only business.

Unlike Vanguard’s Solo 401K Plan, by adopting IRA Financial Group’s Solo 401K Plan, you can serve as trustee of the plan and make traditional investments as well as non-traditional investments such as real estate tax-free and without custodian consent.

Have an investment you want to make with your retirement funds, like real estate, but Vanguard won’t let you do it even though it ‘s approved by the IRS?  Then IRA Financial Group’s Solo 401K Plan is your solution.

Make high Tax-Free Contributions: Similar to the Vanguard Solo 401K Plan, with IRA Financial Group’s Solo 401K Plan you can to make tax-deductible annual contributions up to $54,000 annually with an additional $6,000 catch up contribution for those over age 50 for 2017.

Tax-Free Loan:  Fidelity Solo 401K Plan offers no loan feature, while IRA Financial Group’s Solo 401K Plan allows plan participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose. The loan has to be paid back over a five-year period at least quarterly at a minimum Prime interest rate (you have the option of selecting a higher interest rate)

Checkbook Control: The most significant advantage of the IRA Financial Group Solo 401k Plan versus the Vanguard Solo 401K Plan is that it offers you checkbook control over your retirement funds. With the Vanguard Solo 401K Plan, the plan participant is relegated to making traditional investments such as stocks and or mutual funds.  In addition, the Solo 401KPlan account is required to be opened at Vanguard.  With IRA Financial Group’s Solo 401K Plan, the plan account can be opened at any local bank, including Chase, Wells Fargo, and even Fidelity.  In addition, with IRA Financial Group’s Solo 401K Plan, the plan participant can make almost any traditional as well as non-traditional investments, such as real estate, precious metals, tax liens, third-party lending, notes, stock, private business, and much more. With IRA financial Group’s Solo 401K Plan, the Plan participant has the freedom to make the investments he or she wants while at the same time to open the 401K account at any local bank or credit union. With IRA Financial Group’s Solo 401K Plan, you can serve as the trustee of the plan giving you checkbook control over your retirement funds. In contrast to Vanguard’s Solo 401K Plan, which restricts your investment opportunities to stocks and mutual funds, with IRA Financial Group’s Solo 401K Plan, making a traditional as well as non-traditional investment such as real estate is as simple as writing a check.

After-Tax Contributions: Vanguard’s Solo 401K Plan does not allow for Roth or after-tax contributions. IRA Financial Group’s Solo 401K Plan contains a built in Roth sub-account which can be contributed to without any income restrictions.  In addition, Vanguard’s Solo 401K Plan does not allow for in-plan Roth conversions or rollovers.  Whereas, IRA Financial Group’s Solo 401K Plan allows for in-plan Roth conversions. However, the Solo 401K Plan participant must pay income tax on the amount converted.

Easy Administration:  Like Vanguard’s Solo 401K Plan, IRA Financial Group’s Solo 401K 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). 
Unlike Vanguard, however, the tax attorneys at the IRA Financial Group will assist you in completing this form is required

No Tax on Real Estate Financing:  Since the Vanguard Solo 401K Plan does allow for real estate investments, you would not be able to benefit from the ability to use nonrecourse financing tax-free when making real estate investments with Solo 401K retirement funds. IRA Financial Group’s Solo 401K Plan will allow one to use nonrecourse leverage tax-free when making real estate investments with plan assets.

IRA Financial Group will take care of setting up your entire Solo 401k Plan. The whole process can be handled by phone, email, fax, or mail and typically takes between 2-7 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our 401k experts and tax and ERISA attorneys are on site greatly reducing the set-up time and cost. Most importantly, each client of the IRA Financial Group is assigned a tax attorney to help with the establishment of the Solo 401k Plan. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

To learn more about the advantages of choosing the IRA Financial Group’s Solo 401K Plan over the Vanguard Solo 401K Plan, please contact a tax professional at 800-472-0646 or visit www.irafinancialgroup.com.

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Mar 15

Learn About the Self-Directed 401k Plan

A Solo 401K Plan, also called a Self-Directed 401K, offers a self employed business owner the ability to use their retirement funds to make almost any type of investment tax-free, including real estate, on their own without requiring custodian consent. Additionally, a Self-Directed 401K Plan will allow you to make high contributions to the Plan (up to $54,000 for plan participants under the age of 50 and $60,000 for plan participants over the age of 50) as well as borrow up to $50,000 for any purpose.

Advantages of Using a Self-Directed 401K

The Self-Directed Solo 401K Plan is such a popular retirement solution for small business owners because the IRS designed it specifically for them. Unlike other 401(k) Plans, which restrict plan investments to just stocks and mutual funds, IRA Financial Group’s Self-Directed 401K Plan is designed specifically to allow plan participants to diversify their retirement portfolio by making traditional as well as non-traditional investments such as real estate and precious metals. The Individual 401K Plan can be adopted by a sole proprietorship, LLC, Partnership, or Corporation.

There are a number of features that make the Self-Directed 401K Plan so appealing and popular among self -employed business owners.

High Contribution Limits: Under the 2017 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 $54,000.

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 $60,000.

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

Tax-Free Loan: With a Self-Directed 401K Plan, a plan participant is eligible to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose, including paying personal expenses such as credit card bills, mortgage payments, personal or business investments, a car, vacation, or anything else. The loan has to be paid back over a five-year period at least quarterly at a minimum prime interest rate (you have the option of selecting a higher interest rate). There is no pre-payment penalty.

Checkbook Control”: One of the most popular aspects of the Self-Directed 401K Plan is that it does not require the participant to hire a bank or trust company to serve as trustee. Unlike, an IRA which requires a financial institution to serve as trustee and custodian of the IRA, in the case of a Self-Directed 401K Plan, the plan account can be opened at any local bank or credit union and the plan participant can serve as trustee of the Self-Directed 401K. This flexibility allows the plan participant (you) to gain “checkbook control” over your retirement funds. In essence, all assets of the Self-Directed 401K Plan will be under the sole authority of the 401k participant.  A Self-Directed 401K 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. With a Self-Directed 401K Plan, making a 401K Plan investment is as simple as writing a check.

It's Time To Let 401(k) Holders Invest Like the Pros A World of Investment Opportunity: With a Self-Directed 401K, you will be able to invest in almost any type of investment opportunity that you discover, including: Real Estate (rentals, foreclosures, raw land, tax liens etc.), Private Businesses, Precious Metals, Hard Money & Peer to Peer Lending as well as stock and mutual funds; you’re only limit is your imagination. The income and gains from these investments will flow back into your Self-Directed 401K Plan tax-free!

Use Leverage Tax-Free: When an IRA buys real estate that is leveraged with nonrecourse mortgage financing, it creates Unrelated Debt Financed Income (a type of Unrelated Business Taxable Income) on which taxes must be paid pursuant to Internal Revenue Code Section 514. A Self-Directed 401K plan is generally exempt from UDFI. What this means is that unlike an IRA, Internal Revenue Code Section 514(c)(9), allows a Self-Directed 401K plan to use nonrecourse leverage to make a real estate acquisition without tax or penalty.

Roth Contributions: The Self-Directed 401K Plan contains a built in Roth sub-account which can be contributed to without any income restrictions. A Self-Directed 401K Plan will allow you to make pre-tax and/or after-tax (Roth) employee deferral contributions to your Plan.

Easy Administration:  The Self-Directed 401K Plan is easy to operate and effortless to administer. There is generally no annual filing requirement unless the assets in your Self-Directed 401K Plan exceeds $250,000, in which case you will need to file a short information return with the IRS (Form 5500-EZ).

Roth Conversion: The Self-Directed 401K Plans allows for the conversion of pre-tax 401K funds to an after-tax Roth sub-account. However, the 401K Plan participant must pay income tax on the amount converted.

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.

Asset & Creditor Protection: In the case of a bankruptcy, the general exemption found in section 522 of the Bankruptcy Code, 11 U.S.C. §522, provides an unlimited exemption for retirement assets exempt from taxation for Section 401(a) (tax qualified retirement plans—pensions, profit-sharing and section 401(k) plans). Thus, ERISA qualified plans, as well as Self-Directed 401K plans, are afforded full bankruptcy exemption. Outside of bankruptcy, state law will govern whether Self-Directed Solo 401K Plan assets are protected from creditors. Most states will provide protection for Self-Directed Solo 401K Plan assets from creditors outside of the bankruptcy context.

IRA Financial Group will take care of setting up your entire Self-Directed 401K Plan. The whole process can be handled by phone, email, fax, or mail and typically takes between 2-10 days to complete, the timing largely depending on the time it takes your current retirement asset custodian to move the funds to the new Self-Directed 401K Plan account. Our tax and ERISA professionals are on-site greatly reducing the set-up time and cost. Most importantly, each client of the IRA Financial Group is assigned a retirement tax professional to help with the establishment of the Self-Directed 401K Plan.

For additional information on the Self-Directed 401(k) Plan, please contact us at 800-472-0646.

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Mar 13

Small Business and Franchise Funding with Your 401k

IRA Financial Group’s Solo 401(k)

“The Entrepreneurial Solution”

If you’ve ever said, “If I could do it over again, I’d be my own boss” then this may be the ideal time to consider your options and opportunities. At IRA Financial Group, we specialize in helping entrepreneurs obtain small business capital to get them started. With the IRA Financial Group’s Solo 401(k), we can assist you in funding your existing or new business through your qualified retirement assets.

Small Business and Franchise Funding with Your 401kFinancing Your Franchise with IRA Financial Group’s Solo 401(k) Plans

Hundreds of new franchise owners and entrepreneurs have used our IRA Financial Group’s Solo 401(k)’s to purchase or recapitalize their business. By simply rolling your existing IRA or 401(k) funds into one of IRA Financial Group’s Solo 401(k) Plans, you can invest in a new business or fund an existing business… without tax penalties.

The IRA Financial Group’s Solo 401(k) plans allow you to:

  • Use funds from retirement accounts like IRAs, 401(k)s, SEPs, etc., without incurring early distribution taxes or penalties
  • Take advantage of tax compliant structures that have already been approved by the Internal Revenue Service
  • Utilize pre-tax dollars to fund or invest in a business
  • Obtain funding fast using your retirement funds to help finance your business
  • Utilize the retirement funds of a sibling, cousin, or friend to help finance your business
  • Solo 401(k) Participants can borrow up to $50,000 or 50% of account value (whichever is less) to help finance their business

Entrepreneurs don’t sit around waiting for the economy to recover; they take action to boost their situation. They become part of the economic solution by creating opportunities for themselves and their families. If this fits your profile, becoming an entrepreneur could very likely be the greatest business opportunity of your life.

Have an IRA Financial Group representative walk you through your small business financing options for becoming an entrepreneur, including the IRS-approved ROBS solution. The IRA Financial Group Solo 401(k) for small business investing is ideal options for aspiring entrepreneurs.

Establish a Solo 401(k) with IRA Financial Group and have immediate checkbook control to access alternative investment opportunities using tax-deferred retirement funds.

For a better understanding on how to fund a new or existing business utilizing your qualified retirement assets, please contact one of our tax specialists for a free consultation at 800-472-0646.

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Mar 10

Who Will Benefit Most From a Solo 401k Plan?

The Solo 401(k) plan is unique and so popular because it is designed explicitly for small, owner only business. It’s a tax efficient and cost effective plan that offers all the benefits of a Self Directed IRA plan, and includes additional benefits, such as high contribution limits (up to $60,000) and a $50,000 loan feature. There are many features of the Solo 401(k) plan that make it so appealing and popular among self employed business owners. A solo 401(k) Plan is typically used by owner owned business for the following purposes:

  • High Contribution Limits: Under the 2017 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.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 $60,000.
  • Loan Feature: While an IRA offers no participant loan feature, the Solo 401k allows participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose.
  • Finance a Business or investment: Borrow up to $50,000 to finance a business or make an investment.
  • Flexible Investment Options: You can invest in almost any type of investment, including real estate, private business entities and commercial paper and channel the gains back into your 401(k) tax free.
  • Roth Type Contributions: With IRAs, those who earn high incomes are disallowed from contributing to a Roth IRA or converting their IRA to a Roth IRA. The Solo 401(k) plan contains a built in Roth sub-account which can be contributed to without any income restrictions.
  • Cost Effective Administration: In general, the solo 401(k) plan is easy to operate. There is generally no annual filing requirement unless your solo 401(k) plan exceeds $250,000 in assets, in which case you will need to file a short information return with the IRS (Form 5500).
  • Exemption from UDFI: When an IRA buys real estate that is leveraged with mortgage financing, it creates Unrelated Debt Financed Income (a type of Unrelated Business Taxable Income) on which taxes must be paid. A Solo 401(k) plan is exempt from UDFI.

Retirement Saving Consolidation Through Rollovers

A solo 401(k) plan can accept rollovers of funds from another retirement savings vehicle, such as an IRA, a SEP, or a previous employer’s 401(k) plan.

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

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Mar 08

New Podcast – How to Get Around the RMD Rules With a Roth 401k Plan

IRA Financial Group’s Adam Bergman discusses strategies for circumventing or delaying RMDs with a Roth 401k Plan.

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Click Here to Listen

 

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