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 14

Why You Should Use a Tax Attorney to Establish a Solo 401(k)

Sales Representatives Who Are Not Trained Tax Attorneys/CPAs Should Not Be Establishing Solo 401(k) Plans

There are several companies on the internet that advertise themselves to be Solo 401(k) Plan providers and experts. However, in most cases, the people that would be involved in drafting your Solo 401(k) Plan documents, as well as advising you, are not tax attorneys or even tax professionals.  Many times, a salesperson or representative of a Solo 401(k) Plan provider will offer you tax or ERISA guidance with respect to a 401(k) Plan feature or an investment, while lacking the adequate knowledge or expertise to do so.  They may even tell you that you don’t need a tax attorney to help you establish the plan.  As a result, we have had to, on many occasions, help individuals who worked with a number of these companies who found themselves in some IRS trouble because they have made improper plan contributions or invested in a prohibited transaction as a result of being mislead by a plan provider representative that was not qualified to provide proper tax advice regarding the unique features of the Solo 401(k). Working directly with a 401(k) tax professional that has been specifically trained on the special tax aspects of the Solo 401(k) to establish and maintain your Solo 401(k) Plan is the only way you can guarantee your plan will remain in full IRS compliance and that you will not be engaging in any plan activities not approved by the plan or the IRS.

Why You Should Use a Tax Attorney to Establish a Solo 401(k)Only Trained Tax Attorneys/CPAs Can Properly Advise You on the Tax Aspects of a Solo 401(k) Plan

Working with trained tax & ERISA attorneys when looking for a Solo 401(k) Plan provider is crucial in ensuring that your plan will be properly setup, as well as remain in full IRS compliance. The Solo 401(k) Plan is based on the rules found in the Internal Revenue Code, which can be quite complicated to the non-tax attorney. Therefore, it is strongly advisable to work with a Solo 401(k) Plan provider like the IRA Financial Group or Bergman Law Group to establish your IRS approved Solo 401(k) Plan. Relying on the advice of a document processor or no-tax professional when it comes to establishing and maintaining your retirement plan puts your retirement future at great risk. Too many times, plan participants have unknowingly violated IRS rules when operating their Solo 401(k) Plan because a plan provider representative that was not qualified to provide relevant tax advice gave them inaccurate and incomplete tax advice or drafted the plan documents incorrectly. Make sure this does not happen to you – work only with qualified 401(k) tax & ERISA professionals who have been specifically trained on the special tax aspects of the Solo 401(k) to establish and maintain your Solo 401(k) Plan.

Don’t Trust an Internet Company Who States You Don’t Need to Work With Trained Tax Attorneys to Establish a Solo 401(k) Plan

Just because your Solo 401(k) has been established does not mean that you no longer need any ongoing tax and ERISA support.  Most Solo 401(k) Plan providers are headed for the exit once the plan has been established.  As you begin administering your Solo 401(k), whether it involves making employee deferral or profit sharing contributions, making a non-traditional investment, taking a plan loan, or considering a Roth conversion, you will want to be able to have the ability to consult with specialized trained tax attorneys and 401(k) Plan tax professionals and get specialized tax and ERISA advice based on your particular retirement or tax question.  IRA Financial Group feels strongly that the ongoing maintenance of the Solo 401(k) is crucial in making sure your Solo 401(k) remains in IRS compliance and the IRS respects all your plan contributions and investment gains. Working directly with tax & ERISA trained attorneys and our 401(k) tax professionals that have been specifically trained on the special tax aspects of the Solo 401(k) will help keep your Solo 401(k) in full IRS compliance.

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 self-directed 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 advantages of using a Solo 401(k) Plan, please contact one of our Solo 401(k) Plan experts at 800-472-0646 for more information.

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Jun 14

Using Your Self-Directed Solo 401k Plan to Invest in 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 an Individual 401(k), also known as 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 401(k), 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 2017 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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Jun 08

IRA Financial Group Individual 401k vs. Scottrade

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.

Most banks and financial institutions, such as Scottrade 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 Scottrade Solo 401K Plans may end up not being very attractive.  In addition, the Scottrade 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 Scottrade’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.

IRA Financial Group Individual 401k vs. Scottrade

Have an investment you want to make with your retirement funds, like real estate, but Scottrade 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 Scottrade 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 Scottrade Solo 401K Plan is that it offers you checkbook control over your retirement funds. With the Scottrade 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 Scottrade.  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 Scottrade’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: Scottrade’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, Scottrade’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 Scottrade’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 Scottrade, 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 Scottrade 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 Scottrade Solo 401K Plan, please contact a tax professional at 800-472-0646 or visit www.irafinancialgroup.com.

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Sep 28

Watch How the Solo 401(k) Structure Works

Watch how the Solo 401k Plan Structure works

Watch how easy it to establish an IRS compliant Solo 401(k) Plan that will allow you to make high annual tax-deductible or Roth contributions – up to ten times the amount of an IRA, Borrow up to $50,000, and use your retirement funds to invest in real estate, precious metals, tax liens, your business and much more tax free and without custodian consent!

Learn how IRA Financial Group’s self-directed Solo 401(k) Plan will allow you to open your new plan account at any local bank and allow you to make investments by simply writing a check!

See how IRA Financial Group’s Solo 401(k) Plan will help you save for your retirement while allowing you to unlock a world of investment opportunities.

Work directly with our in-house retirement tax professionals to set-up an IRS compliant Solo 401(k) Plan. Our retirement tax professionals have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP.

Call us today at 800-472-0646 and learn more about the benefits and tax advantages of establishing a Solo 401(k) Plan. Take control of your retirement funds now! It’s quick and easy and we can have your Plan established in days!

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Aug 21

IRS Guidelines for a Solo 401k

The “Solo 401K plan” is an IRS approved type of qualified plan , which is suited for business owners who do not have any employees, other than themselves and perhaps their spouse. The “one-participant 401(k) Plan” is not a new type of plan. It is a traditional 401(k) plan covering only one employee. The plans have the same rules and requirements as any other 401(k) plan. The surging interest in these plans is a result of the EGTRRA tax law change that became effective in 2002. The law changed how salary deferral contributions are treated when calculating the maximum deduction limits for contributions to a 401(k) plan. This change created an opportunity for some people to put away additional amounts toward their retirement.

Solo 401(k) Plans are generally permitted to engage in most types of investments, however, if a Solo 401(k) Plan engages in certain types of “prohibited transactions” it may trigger a prohibited transaction which could lead to disqualification of the Solo 401(k) Plan and severe tax consequences. Therefore, it is important that you familiarize yourself with the Solo 401(k) prohibited transaction rules.

Please contact one of our Solo401(k) Experts at 800-472-0646 for more information.

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Jul 28

Choosing the Best Solo 401(k) Provider

Selecting the best Solo 401(k) plan provider is an important decision that should be researched thoroughly.  Below are several tips to help you select the best Solo 401(k) Plan provider for your self-employed or small business retirement plan.

1. Always Make Sure You Are Working With a Tax & ERISA Professional: There are several companies on the internet that advertise themselves to be Solo 401(k) plan providers and experts, however, in most cases, the people that would be involved in drafting your Solo 401(k) plan documents as well as advising you are not tax attorneys or even tax professionals. Working with an experienced tax & ERISA professionals when looking for a Solo 401(k) Plan provider is crucial in ensuring that your plan will be properly setup as well as remain in full IRS compliance. The Solo 401(k) plan is based on the rules found in the Internal Revenue Code, which can be quite complicated to the non-tax attorney. Therefore, it is strongly advisable to work with a Solo 401(k) Plan provider, like the IRA Financial Group or Bergman Law Group, to establish your IRS approved Solo 401(k) Plan. Relying on the advice of a document processor or no-tax professional when it comes to establishing and maintaining your retirement plan puts your retirement future at great risk. Too many times, plan participants have unknowingly violated IRS rules when operating their Solo 401(k) Plan because a plan provider representative that was not qualified to provide relevant tax advice gave them inaccurate and incomplete tax advice or drafted the plan documents incorrectly. Make sure this does not happen to you – work only with qualified 401(k) plan tax & ERISA professionals who have been specifically trained on the special tax aspects of the Solo 401(k) Plan to establish and maintain your Solo 401(k) Plan.

2. Open Architecture Self-Directed Solo 401(k) Plan Is the Way to Go: Not all Solo 401(k) Plans are the same.  Most Solo 401(k) Plans offered by a bank or financial institution are not self-directed.  What that means is that you will be restricted to making the investments offered by the bank or financial institution and will not be permitted to purchase real estate, precious metals, private business investments, option & currency trading, hard money loans, etc.  Once you adopt a Solo 401(k) Plan, you should have a plan that features all the IRS options available for qualified retirement plans, including the ability to make non-traditional investments, such as real estate. IRA Financial Group offers an open architecture Solo 401(k) Plan that allows you to make any IRS approved investment without requiring the consent of a custodian. As trustee of your Self-Directed Solo 401(k) Plan, you will have “checkbook control” over your plan funds and will have total control over plan assets.

3. Take Advantage of Your Right to Borrow up to $50,000 from Your Plan: Not all Solo 401(k) Plans include a loan feature, which is an IRS approved feature. IRA Financial Group’s Solo 401(k) 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, 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).

4. Be Sure You Have a Roth Option: Most Solo 401(k) Plan providers do not allow for Roth (after-tax) contributions. IRA Financial Group’s Solo 401(k) Plan contains a built in Roth sub-account which can be contributed to without any income restrictions.  In addition, most Solo 401(k) plan providers do not allow for in-plan Roth conversions or rollovers.  Whereas, IRA Financial Group’s Solo 401(k) Plan allows for in-plan Roth conversions. However, the Solo 401(k) Plan participant must pay income tax on the amount converted.

5. Ongoing Tax & 401(k) Plan Support is a Must: Just because your Solo 401(k) Plan has been established does not mean that you no longer need any ongoing tax and ERISA support.  Most Solo 401(k) Plan providers are headed for the exit once the plan has been established.  As you begin administering your Solo 401(k) Plan, whether it involves making employee deferral or profit sharing contributions, making a non-traditional investment, taking a plan loan, or considering a Roth conversion, you will want to be able to have the ability to consult with a specialized 401(k) Plan tax professionals and get specialized tax and ERISA advice based on your particular retirement or tax question.  The ongoing maintenance of the Solo 401(k) Plan is crucial in making sure your Solo 401(k) Plan remains in IRS compliance and that the IRS respects all your plan contributions and investment gains. Working directly with a 401(k) plan tax professional that has been specifically trained on the special tax aspects of the Solo 401(k) Plan will help keep your Solo 401(k) plan in full IRS compliance.

6. Take Control of Your Solo 401(k) Plan from the Plan Provider: Most Solo 401(k) Plan providers will require that you hold the plan assets at their institution. With IRA Financial Group’s Self-Directed Solo 401(k) Plan, you can hold the plan assets at the bank of your choosing and gain “checkbook control” over the funds. With IRA Financial Group, making an investment is as easy as writing a check.

7. Stay Away from Plan Providers who Outsource Their Plan Maintenance Services: Most Solo 401(k) Plan providers do not assist or offer advice with respect to the maintenance and administration of a Solo 401(k) Plan, including the completion of the IRS Form 5500-EZ. They generally refer all questions to an outside tax attorney or accountant. IRA Financial Group offers all of its Solo 401(k) Plan clients direct access to its in-house retirement tax professionals and CPAs regarding maintenance or administrative questions concerning the plan. Whether it’s answering a question about a plan feature, investment, an update in the law, or with help completing the IRS Form 5500-EZ, you will work one-on-one with an IRA Financial Group retirement tax professional and CPA who are familiar with your plan and retirement goals.

8. Stay Away from Excessive Annual Fees: Sine most Solo 401(k) Plans have less the $250,000 in plan assets, there would be no annual filing requirement for the plan. Hence, why pay excessive annual administration fees to a plan provider who will not be offering you or your plan any value or services. Even if your Solo 401(k) Plan has in excess of $250,000 of plan assets, the IRS Form 5500-EZ is quite simple to complete and should not be too costly.

9. Don’t Take Tax Advice from a Salesperson – Talk Directly with a 401(k) Plan Tax Professional or CPA: Many times a salesperson or representative of a Solo 401(k) Plan provider will offer you tax or ERISA guidance with respect to a 401(k) plan feature or an investment without lacking the adequate knowledge or expertise. Make sure you are only receiving plan related advice or information from a specialized 401(k) plan tax professional. Too many times, plan participants have made improper plan contributions or invested in a prohibited transaction because they were mislead by a plan provider representative that was not qualified to provide proper tax advice regarding the unique features of the Solo 401(k) Plan. Working directly with a 401(k) plan tax professional that has been specifically trained on the special tax aspects of the Solo 401(k) Plan to establish and maintain your Solo 401(k) Plan is the only way you can guarantee your plan will remain in full IRS compliance and that you will not be engaging in any plan activities not approved by the Plan or the IRS.

To learn more about the importance of selecting the right Solo 401(k) plan provider, please contact a retirement tax expert at 800-472-0646.

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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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