Dec 18

What To Know Before Purchasing Cryptocurrencies With Retirement Funds

The following, written by Adam Bergman, first appeared on Forbes.com:

With the value of Bitcoins and many other cryptocurrencies flying high in 2017, many investors have looked to take advantage of this trend and own cryptocurrencies in tax-advantaged retirement plans, such as a Self-Directed IRA or Solo 401(k) Plan.  This article will explore the main points an investor should know before using retirement funds to buy cryptocurrencies.

What is a Cryptocurrency?

What To Know Before Purchasing Cryptocurrencies With Retirement FundsCryptocurrency refers to a decentralized digital currency that employs principles of cryptography (communication that is secure from view of third parties) to ensure security, privacy, and anonymity. Consequently, the value of a cryptocurrency is not set by anyone other than market participants, who engage in the process of buying and selling on an exchange platform.

Bitcoin has become the leader in shepherding in a wave of cryptocurrencies built on decentralized peer-to-peer network and is the primary standard for cryptocurrencies. The currencies inspired by Bitcoin are collectively called Altcoins and have tried to present themselves as modified or improved versions of Bitcoin.  The five most popular cryptocurrencies are Bitcoins, Ethereum (ETH) & Ethereum Classic, Litecoin, ZCash and Dash.  There are close to 1000 types of cryptocurrencies, so this list can vary over time.

How does the IRS Treat Cryptocurrencies from a Tax Standpoint?

Even though Bitcoin is labeled as a “cryptocurrency”, from a Federal income tax standpoint, Bitcoins and other cryptocurrency are not considered a “currency.”  On March 25, 2014, the IRS issued Notice 2014-21, which for the first time set forth the IRS position on the taxation of virtual currencies, such as Bitcoins.  According to the IRS Notice, “Virtual currency is treated as property for U.S. federal tax purposes.” The Notice further stated, “General tax principles that apply to property transactions apply to transactions using virtual currency.”  In other words, the IRS is treating the income or gains from the sale of a virtual currency, such as Bitcoins, as a capital asset, such as stocks or real estate, subject to either short-term (ordinary income tax rates) or long-term capital gains tax rates, if the asset is held greater than twelve months (15% or 20% tax rates based on income).  By treating Bitcoins and other virtual currencies as property (capital asset) and not currency, the IRS is requiring the investor to maintain detailed transaction records (i.e. basis, holding period, etc.) in order to determine the amount of tax from the cryptocurrency transaction(s).

Can I purchase Cryptocurrencies with a Retirement Account?

The Internal Revenue Code does not describe what a Self-Directed IRA or Solo 401(k) Plan can invest in, only what it cannot invest in. Internal Revenue Code Sections 408 & 4975 prohibits Disqualified Persons from engaging in certain types of transactions. The foundation of the prohibited transaction rules is based on the premise that investments involving an IRA and related parties are handled in a way that benefits the retirement account and not the IRA owner. The rules prohibit transactions between the IRA and certain individuals known as “disqualified persons.” The definition of a “disqualified person” (Internal Revenue Code Section 4975(e)(2)) extends into a variety of related party scenarios, but generally includes the IRA holder, any ancestors or lineal descendants of the IRA holder, and entities in which the IRA holder holds a controlling equity or management interest.

Because the IRS treats cryptocurrencies, such as Bitcoins, as a capital asset, such as stocks or real estate, a retirement account is permitted to buy, sell, or hold cryptocurrencies, subject to the prohibited transaction rules found under Internal Revenue Code Section 4975(c).

Why use a Retirement Account to Invest in Cryptocurrencies?

When purchasing cryptocurrencies, such as Bitcoins, with a Self-Directed IRA or Solo 401(k) Plan, all income and gains generated by your pre-tax retirement account investment would generally flow back into the retirement account tax-deferred or tax-free in the case of a Roth IRA. Instead of paying tax on the gains of the crypto investment, tax is paid only at a later date or never at all, in the case of a Roth IRA, leaving the crypto investment to grow unhindered without tax.

How to Use Retirement Funds to Buy, Hold, or Sell Cryptocurrencies?

In general, the two most popular ways to purchase cryptocurrencies with retirement funds is through a Self-Directed IRA or Solo 401(k) Plan.  Below is a step-by-step summary of how to purchase cryptocurrencies with a Solo 401(k) Plan:

A Solo 401(k) Plan is a qualified retirement plan that is established by a business with no full-time employees other than the owners or their spouses.

  1. Establish a Self-Directed Solo 401(k) Plan.
  2. Rollover retirement funds, cash or in-kind, tax-free to new Solo 401(k) Plan account.
  3. You, as trustee of the Solo 401(k) Plan, will then have “Checkbook Control” over all the assets/funds in the plan to make the cryptocurrency investment.
  4. A cryptocurrency account could be opened in the name of the Solo 401(k) Plan or a special purpose LLC wholly owned by the Solo 401(k) Plan. Many investors seem to like using an LLC wholly owned by a 401(k) plan as a vehicle to own the cryptos as it generally helps expedite the account opening process at the more popular cryptocurrency exchanges.
  5. You, as trustee of Solo 401(k) Plan or manager of the LLC, if applicable, will then wire the 401(k) funds to the new cryptocurrency account opened at a crypto exchange. The account will be opened in the name of the Solo 401(k) Plan or the LLC, if applicable.
  6. The cryptos can then be held at the exchange or via an online or offline wallet.
  7. Since a 401(k) plan is a tax-exempt qualified retirement plan, all income and gains from the cryptocurrency investment would flow back to the Solo 401(k) Plan tax-deferred or tax-free in the case of a Roth Solo 401(k) account. Whereas, a special purpose LLC wholly owned by a 401(k) plan would be treated as a disregarded entity for tax purposes. No Federal income tax return is required to be filed, although, some states may impose filing or franchise taxes on the LLC. Accordingly, in general, all income and gains from the cryptocurrency investment should flow back to the 401(k) plan without tax. One should consult with their tax advisor to better understand the implications of using a special purpose LLC wholly owned by a 401(k) plan to purchase cryptocurrencies.

Cryptocurrency investments, such as Bitcoins, are risky and highly volatile.  Any retirement account investor interested in using retirement funds to invest in cryptocurrencies should do their diligence and proceed with caution.

For more information about using a Solo 401(k) to invest in cryptocurrencies, please contact us @ 800.472.0646.

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Dec 11

IRA Financial Group Releases Cryptocurrency E-Info Kit for Solo 401(K) Plan Investors

New Bitcoin E-Kit will help investors understand how to purchase cryptocurrencies with 401(k) funds

IRA Financial Group, the leading provider of self-directed IRA LLC and Solo 401(k) Plans, announces the launch of a new Cryptocurrency E-Info Kit. The free cryptocurrency information kit will help retirement account holders looking to purchase cryptocurrencies, such as Bitcoins, with their retirement accounts to better understand what is involved in the process. “The IRA Financial Group Crypto E-Info Kit will help guide retirement account holders looking to use a Solo 401(k) plan to buy cryptocurrencies, such as bitcoins,” stated Adam Bergman, a partner with the IRA Financial Group.

IRA Financial Group’s Crypto 401(k) platform with checkbook control will allow retirement account holders to buy, sell, or hold Bitcoins and other cryptocurrency assets and generate tax-deferred or tax-free gains, in the case of a Roth Solo 401(k). The primary advantage of using a Solo 401(k) to make Bitcoin investments is that all income and gains associated with the 401(k) investment grow tax-deferred.IRA Financial Group Releases Cryptocurrency E-Info Kit for Solo 401(K) Plan Investors

IRA Financial Group is the market’s leading provider of self-directed retirement plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent. The IRA Financial Trust Company, a self-directed IRA custodian, was founded by Adam Bergman, a partner with the IRA Financial Group.

IRA Financial Group is the market’s leading provider of self-directed retirement plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

Adam Bergman, IRA Financial Group partner, has written six books the topic of self-directed retirement plans, including, “The Checkbook IRA”, “Going Solo,” Turning Retirement Funds into Start-Up Dreams, Solo 401(k) Plan in a Nutshell, Self-Directed IRA in a Nutshell, and in God We Trust in Roth We Prosper.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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Sep 06

Why Choose IRA Financial Group for Your Individual 401(k) Plan?

An IRA Financial Group Individual 401(k), also known as a Solo 401(k), offers lots of benefits.  Here are just a few –

Excellence: Our in-house retirement tax professionals have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP. Their tax and ERISA experience is unmatched in the industry and is the reason we are considered the leading facilitator of true “Checkbook Control” Solo 401(k) Plan structures.

Why Choose IRA Financial Group for Your Individual 401(k) Plan?Work directly with our in-house retirement tax professionals to set-up an IRS compliant Solo 401K Plan. Our clients have direct access to our in-house retirement tax professionals to ensure that the Solo 401K Plan is customized to satisfy the client’s retirement and investment objectives. In fact, we encourage our clients to contact our in-house retirement tax professionals with any tax and ERISA questions concerning the structure or a proposed investment to ensure full IRS compliance.

Our Solo 401K experts will take care of the entire set-up of your IRS compliant Solo 401k Plan. Our Solo 401k Plan experts and tax and ERISA professionals are on site greatly reducing the set-up time and cost. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

Leader: IRA Financial Group is the markets leading provider of Solo 401(k) Plans. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investments.

Value: We strive to offer our clients customized Solo 401(k) Plans at a fair and reasonable price. Whereas our competitors are forced to outsource much or all of their tax work and consultation, each client of the IRA Financial Group is assigned to one of our in-house retirement tax professionals allowing us to offer customized Solo 401(k) Plans for significantly less than our competitors.

We provide the following all for one low price:

  • Free tax consultation with our in-house tax and ERISA professionals
  • Adoption Agreement
  • Basic Plan Document
  • EGTRRA Amendment
  • Summary Plan Description
  • Trust Agreement
  • Appointment of Trustee
  • Beneficiary Designation
  • Loan Procedure
  • Loan Promissory Note
  • Free tax updates
  • Free tax and ERISA support
  • Satisfaction Guaranteed!

Integrity: We are guided by the rules of ethical conduct in all that we do. Our relationships with clients are built on trust, respect, and confidentiality.

Innovative: We anticipate the changing tax and financial needs of our clients and creatively adapt our Solo 401(k) Plan tax solutions to address them.

Results: We are committed to our clients’ satisfaction and strive to meet and exceed our clients’ expectations.

IRA Financial Group will take care of everything. The whole process can be handled by phone, email, fax, or mail. Our expert tax and ERISA professionals are on site greatly reducing the set-up time and cost. Most importantly, you will find that our fee for this service is significantly less than other companies that perform the same or similar services.

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

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Aug 24

What Can You Invest in With a Self-Directed Solo 401(k)?

A Solo 401(k) Plan offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS and Department of Labor only describe the types of investments that are prohibited, which are very few.

The following are some examples of types of investments that can be made with your Solo 401(k) Plan:

  • Residential or commercial real estate
  • Domestic of foreign real estate
  • Raw land
  • Foreclosure property
  • Mortgages
  • Mortgage pools
  • Deeds
  • Private loans
  • Tax liens
  • Private businesses
  • Limited Liability Companies
  • Limited Liability Partnerships
  • Private placements
  • Precious metals and certain coins
  • Stocks, bonds, mutual funds
  • Foreign currencies

Solo 401(k) Flow Chart

Real Estate

The IRS permits using a Solo 401(k) to purchase real estate or raw land. Since you are the trustee of the 401(k) Plan, making a real estate investment is as simple as writing a check from your 401(k) Plan bank account. The advantage of purchasing real estate with your Solo 401(k) Plan is that all gains are tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

Solo 401(k) Investments For example, if you purchased a piece of property with your Solo 401(k) Plan for $100,000 and you later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-free. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and in most cases state income tax.

Tax Liens

The IRS permits the purchase of tax liens and tax deeds with a Solo 401(k) Plan. By using a Solo 401(k) Plan to purchase tax-liens or tax deeds, your profits are tax-deferred back into your retirement account until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

More importantly, with a Solo 401(k) Plan, you, as trustee of the 401(k) Plan, will have “checkbook control” over your retirement funds allowing you to make purchases on the spot without custodian consent. In other words, purchasing a tax-lien or tax deed is as easy as writing a check!

Loans & Notes

The IRS permits using 401(k) funds to make loans or purchase notes from third parties. By using a Solo 401(k) Plan to make loans or purchase notes from third-parties, all interest payments received would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you used a Solo 401(k) to loan money to a friend, all interest received would flow back into your 401(k) Plan tax-free. Whereas, if you lent your friend money from personal funds (non-retirement funds), the interest received would be subject to federal and in most cases state income tax.

Private Businesses

With a Solo 401(k) you are permitted to purchase an interest in a privately held business. The business can be established as any entity other than an S Corporation (i.e. limited liability company, C Corporation, partnership, etc.). When investing in a private business using 401(k) funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512. The retirement tax professionals at the IRA Financial Group will work with you to develop the most tax-efficient structure for using your Solo 401(k) Plan to invest in a private business.

Precious Metals & Coins

Our Solo 401(k) Plan documents allow for investments into IRS approved precious metals and coins (bullion), as defined in Internal Revenue Code Section 4975. The advantage of using a Solo 401(k) Plan to purchase precious metals and/or coins is that their values generally keep up with, or exceed, inflation rates better than other investments. In addition, the IRS approved precious metals and/or coin (bullion) should be held at an approved depository or U.S. Bank, as defined under Internal Revenue Code Section 408(a).

Foreign Currencies

The IRS does not prevent the use of 401(k) funds to purchase foreign currencies, including Iraqi Dinars. In fact, our Solo 401(k) Plan documents permit the purchase of foreign currencies. Many believe that foreign currency investments offer liquidity advantages to the stock market as well as significant investment opportunities.

By using a Solo 401(k) to purchase foreign currencies, such as the Iraqi Dinar, all foreign currency gains generated would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

Stocks, Bonds, Mutual Funds, CDs

In addition to non-traditional investments such as real estate, a Solo 401(k) may purchase stock, bonds, mutual funds, and CDs. The advantage of using a Solo 401(k) Plan with “Checkbook Control” is that you are not limited to just making these types of investments. With a Solo 401(k) Plan with “checkbook control” you can open a stock trading account with any financial institution as well as purchase real estate, buy tax liens, or lend money to a third-party. Your investment opportunities are endless!

For additional information on the advantages of using a Solo 401K Plan to make investments, please contact one of our 401(k) Experts at 800-472-0646.

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Jun 12

Why Should You Use IRA Financial Group for Your Individual 401k Plan?

IRA Financial Group is one of the top Solo 401(k) plan facilitators in the country.  Here are just a few reasons why you should consider us for your self-employed retirement needs –

Excellence: Our in-house retirement tax professionals have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP. Their tax and ERISA experience is unmatched in the industry and is the reason we are considered the leading facilitator of true “Checkbook Control” Solo 401K Plan structures.

Why Should You Use IRA Financial Group for Your Individual 401k Plan?Work directly with our in-house retirement tax professionals to set-up an IRS compliant Solo 401K Plan. Our clients have direct access to our in-house retirement tax professionals to ensure that the Solo 401K Plan is customized to satisfy the client’s retirement and investment objectives. In fact, we encourage our clients to contact our in-house retirement tax professionals with any tax and ERISA questions concerning the structure or a proposed investment to ensure full IRS compliance.

Our Solo 401K experts will take care of the entire set-up of your IRS compliant Solo 401k Plan. Our Solo 401k Plan experts and tax and ERISA professionals are on site greatly reducing the set-up time and cost. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

Leader: IRA Financial Group is the markets leading provider of Solo 401(k) Plans. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investments.

Value: We strive to offer our clients customized Solo 401(k) Plans at a fair and reasonable price. Whereas our competitors are forced to outsource much or all of their tax work and consultation, each client of the IRA Financial Group is assigned to one of our in-house retirement tax professionals allowing us to offer customized Solo 401(k) Plans for significantly less than our competitors.

We provide the following all for one low price:

  • Free tax consultation with our in-house tax and ERISA professionals
  • Adoption Agreement
  • Basic Plan Document
  • EGTRRA Amendment
  • Summary Plan Description
  • Trust Agreement
  • Appointment of Trustee
  • Beneficiary Designation
  • Loan Procedure
  • Loan Promissory Note
  • Free tax updates
  • Free tax and ERISA support
  • Satisfaction Guaranteed!

Integrity: We are guided by the rules of ethical conduct in all that we do. Our relationships with clients are built on trust, respect, and confidentiality.

Innovate: We anticipate the changing tax and financial needs of our clients and creatively adapt our Solo 401(k) Plan tax solutions to address them.

Results: We are committed to our clients’ satisfaction and strive to meet and exceed our clients’ expectations.

IRA Financial Group will take care of everything. The whole process can be handled by phone, email, fax, or mail. Our expert tax and ERISA professionals are on site greatly reducing the set-up time and cost. Most importantly, you will find that our fee for this service is significantly less than other companies that perform the same or similar services.

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

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May 08

If a Couple Both Contribute to a Solo 401k, Can they Both Utilize the Loan Feature?

Yes. One of the main advantages of the Solo 401(k) Plan is that it allows participants to borrow up to $50,000 or 50% of their account value (whichever is less) for any purpose. Thus, you and your spouse would each be permitted to borrow up to $50,000 ($100,000 total) to be used for any purposes, including financing a business.

If a Couple Both Contribute to a Solo 401k, Can they Both Utilize the Loan Feature?

Benefits of taking a loan include –

  • Lend the funds to a third-party who will pay a higher interest rate
  • Invest in a real estate project that offers a higher rate of return than the low interest rate you must pay
  • To consolidate debt
  • To pay for college expenses
  • To pay for unexpected emergencies
  • Avoid distribution penalties and gain use up to $50,000 immediately with no restrictions
  • Invest in a new franchise or business
  • Make any alternative Investment that will generate a higher rate of return than the low Interest rate imposed on you, such as tax liens, private placements, or mortgage pools.
  • Invest in a transaction that would otherwise be a Prohibited Transaction under Internal Revenue Code Section 4975.
  • Quick, easy, and cheap access to a $50,000 loan to be used for any purpose

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

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Apr 24

Distribution Rules for an Individual 401(k) Plan

An Individual 401(k), also known as a  Solo 401(k) or One Participant 401(k) plan, is a great retirement plan for accumulating retirement wealth through high contributions and alternative asset investment opportunities. However, there are times that one needs to access their Solo 401(k) plan funds either voluntarily or as required by law.

In the case of an IRA, the IRA owner may take distributions from his or her IRA at any time. The determination of whether the distribution is taxed depends on the type of IRA (i.e., traditional or Roth), the age of the IRA owner, and in the case of a Roth IRA, the duration of time the account has been established. However, when it comes to taking funds out of a 401(k) plan, there are certain rules and requirements that must be satisfied before a distribution can be taken.

It may seem unfair to some that one would need to satisfy certain rules before gaining access to ones Solo 401(k) plan funds, but that is the way the rules work. When it comes to determining what funds in your Solo 401(k) plan you will have access to, the first thing to do it to look at the Solo 401(k) Basic Plan Document or speak with your plan administrator. That being said, the following is a general overview of the distribution rules most commonly found in standardized Solo 401(k) plan documents in the marketplace today.

Distribution Rules for an Individual 401(k) PlanBefore we get into the taxable ways one can to take funds out of your 401(k) plan, the Solo 401(k) loan feature, which is an option in many Solo 401(k) plan, is essentially the only way one can get tax-free and penalty free use of funds in a Solo 401(k) Plan.

Solo 401(k) Plan Loan Option

If your Solo 401(k) plan offers the Solo 401(k) loan option, a plan participant has the ability to borrow the lesser of $50,000 or 50% of their plan account value. The personal loan can be used for any purpose. The Solo 401(k) plan loan must be paid back over a five-year period, at least quarterly, at a minimum interest rate of Prime as per the Wall Street Journal, which as of 3/15/17 is 4.00%.

The Solo 401(k) Plan loan feature would allow a plan participant to use plan funds for any purpose without having to worry about the plan distribution rules.

In the cases where the Solo 401(k) plan loan feature is not a viable option and the plan participant is need of plan funds, there are several other options for accessing the funds.

Rollovers

In the case of retirement funds that have been rolled into the plan from another retirement account, such as an IRA or 401(k) plan, those funds can generally be rolled out of the plan at any time without the need for any triggering event. A rollover is not a contribution made to the plan by the plan participant or employer, but retirement funds contributed to n IRA or another 401(k) plan that are now being transferred into the plan. Most Solo 401(k) plan documents include a provision that allows rollover funds to be rolled out of the plan and into another retirement account without the need to satisfy any age requirements or plan service rules.

Employee Deferrals

Elective employee deferrals are amounts contributed to a plan by the employer at the employee’s election and which, except to the extent they are designated Roth contributions, are excludable from the employee’s gross income. For 2017, 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. The contributions can be up to 100% of the participant’s self-employment compensation.

In the case of employee deferrals, most Solo 401(k) plan documents do not allow a plan participant to access employee deferrals unless a plan triggering event has occurred or they can satisfy a hardship distribution criteria.

Plan Triggering Event

In general, distributions from a Solo 401(k) cannot be made until one of the following occurs: · The employee reaches retirement age as defined under the plan, which is typically the age of 59 1/2.
· The employee becomes disabled.
· The employee dies, at which time the beneficiary is eligible for distributions.
· The employee separates from service.
· The plan is terminated and is not replaced by another defined contribution plan.

Therefore, if a plan participant is under the age of 591/2 and continues to be employed by the adopting employer and the plan is not being terminated, other than in the case of a hardship, the plan participant would not be able to access his or her employee deferrals for purposes of taking a distribution from the plan.

Hardship Distributions

The determination of whether your Solo 401(k) plan will allow for hardship distributions is based on the plan documents. Satisfying the hardship distribution rules could allow you to access your funds and would allow you to eliminate paying the 10% early distribution penalty, but it will not allow you to circumvent paying tax on the hardship distribution amount, is applicable.

If a Solo 401(k) plan provides for hardship distributions, it must provide the specific criteria used to make the determination of hardship. Thus, for example, a plan may provide that a distribution can be made only for medical or funeral expenses, but not for the purchase of a principal residence or for payment of tuition and education expenses. In determining the existence of a need and of the amount necessary to meet the need, the plan must specify and apply nondiscriminatory and objective standards. Below are some of the most common criteria found in standard Solo 401(k) plan documents for taking a hardship distribution:

· Medical expenses for you, your spouse or your dependents or expenses that are necessary for these persons to obtain medical care.
· Purchase of your principal residence (excluding mortgage payments). Amount is capped at $10,000.
· Payment of tuition and related educational fees, and room and board expenses for the next 12 months of post-secondary education for you, your spouse or your dependents.
· The need to prevent the eviction from, or mortgage foreclosure of, your principal residence.
· Payment for burial or funeral expenses for your deceased parent, spouse, children or dependents.
· Expenses for the repair of damage to your principal residence that would qualify for the casualty deduction under Code Section 165.

In summary, in the case of employee deferrals, if a plan participant is not able to satisfy any of the plan triggering events or any of the hardship distribution requirements contained in the Solo plan, the plan participant is generally not able to access any employee deferral contributions made to the plan.

Employer Profit Sharing Contributions

In general, most Solo 401(k) plan documents allow the employer to make employer profit sharing contributions, which are based off a percentage of the plan participant’s income amount. For 2017, the employer may make an additional contribution to the plan participant 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).

Unlike employee deferrals, most Solo 401(k) plan documents allow employer profit sharing contributions to be accessed after a certain amount of time, also known as a vesting period. Most plan documents allow a plan participant to access all employer profits haring contributions after being in the plan for over five years (five-year vesting period). In addition, some Solo 401(k) plan documents allow a plan participant to access some of the employer profit sharing contributions after being in the plan for two years (two-year vesting schedule). Any employer profit sharing contributions taken as a distribution would be subject to tax and penalty, if applicable.

After-Tax Contributions

In general, an after-tax contribution is a contribution made to a Solo 401(k) plan or any other retirement account after taxes has been deducted from an individual’s taxable income. The Solo 401(k) plan documents will determine whether after-tax contributions are permitted to be made to the plan. In the case where after-tax contributions can be made to the plan, most Solo 401(k) plan documents do not impose any rules or restrictions on accessing the after-tax funds for rollover or distribution. In other words, unlike employee deferral and employer profit sharing contributions, no plan-triggering event, hardship criteria, or vesting schedule must be satisfied. The after-tax funds are available at anytime for rollover or distribution. This has contributed to the growing popularity of using after-tax contributions as a means of maximizing ones annual Solo 401(k) contributions as well providing greater access to ones retirement funds when necessary.

For more information on the distribution rules for a Solo 401(k) plan, please contact a retirement tax specialist at 800-472-0646.

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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 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 02

Do All Solo 401k Plans Offer the Same Benefits?

When it comes to determining what type of 401(k) qualified retirement plan is best for a self-employed individual or small business owner with no employees, 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.

Most financial institutions offer Solo 401K Plans, often called individual 401K Plans. However, if you do not want to be forced to invest all your hard earn retirement savings in the stock market, then these type of financial institution Solo 401(k) Plans are not very attractive. In addition, most financial institution Solo 401(k) 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.  There are many features of the IRA Financial Group’s Solo 401K plan that make it so appealing for small business owners.

High Contributions: Like all Solo 401K Plans, for 2017, IRA Financial Group’s Solo 401(k) Plan will allow a plan participant to make annual contributions up to $54,000 annually with an additional $6,000 catch-up contribution for those over age 50. The high contribution feature is one of the reasons a Solo 401K Plan is the most popular retirement vehicle for the self-employed.

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

Tax and Penalty free loan: Unlike most Solo 401K Plans offered by the traditional financial institutions such as Fidelity, 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, including paying credit card bills, mortgage payments, 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).

Checkbook Control: The most attractive feature of the IRA Financial Group Solo 401k Plan is that it offers the plan participant checkbook control over his or her retirement funds. In the case of a conventional Solo 401K Plan offered by most financial institutions, 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 the financial institution. 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, 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 opening the 401K account at any local bank. As trustee of the Solo 401K Plan, the Plan Participant (you) can serve as the trustee providing you checkbook control over your retirement funds. With IRA Financial Group’s Solo 401K Plan, making a Solo 401K Plan investment is as simple as writing a check.

Roth Contributions & Conversion: Unlike a conventional Solo 401K Plan offered by most financial institutions, 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, the IRA Financial Group’s Solo 401K Plan allows for the conversion of a traditional 401(k) or 403(b) account to a Roth subaccount. However, the Solo 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.

Easy Administration: Like all Solo 401K Plans, 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). However, unlike a financial institution, the tax professionals at the IRA Financial Group will assist you in completing this form is required.

To learn more about the advantages of the Solo 401K Plan with Checkbook Control please contact a 401K Expert at 800-472-0646.

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