If you have a self-directed, or solo 401(k)—or what the IRS calls a one-participant 401(k)—you already know the taxman requires you to report accounts with more than $250,000 in annual assets. This is done through the IRS form 5500-EZ.
If you are terminating a self-directed 401(k), whether it is associated with you as a sole-proprietor or through an entity you own, you also need to file a 5500-EZ form. In fact, once you close your account, the IRS gives you seven months to file. How does this work?
As the Trustee of your account, you are responsible for a great amount of the work related to terminating your plan. Transferring your funds to another retirement account, for example, is not the only part of a plan’s termination.
In order for you to be compliant with the IRS regulations, you will need to contact your plan document sponsor. In turn, the sponsor will provide you with the necessary forms required for you to terminate your account.
Once you have completed the forms provided to you by your plan document sponsor, you will need to file the 5500-EZ Form with the IRS. This form, which can be downloaded from the IRS website, is relatively simple. However, hiring a reputable professional may be a good idea. Contact us if you need a referral or if you have other questions!
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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