Solo 401(k) plans are a great benefit for sole proprietors. I know, I have one. The problem is they are on the Internal Revenue Service\u2019s (IRS\u2019) radar.<\/p>\n\n\n\n
The IRS\u2019s Tax Exempt and Government Entities division has identified one-participant 401(k) plans as among its current audit initiatives. Why? They\u2019re usually run with very little administration and assistance to these solo 401(k) plan sponsors. Solo 401(k) plans are subject to the same rules and requirements as any other 401(k) plan, but they aren\u2019t run that way.<\/p>\n\n\n\n
Some solo 401(k) plans have huge compliance issues, such as not covering employees for coverage (which means they should have non-Solo 401(k) plan in place). Some solo 401(k) plans don\u2019t file a Form 5500, even though they have to when $250,000 or more are in the plan. There could be a violation of the plan sponsor exceeding the contribution and deduction limits, as well as controlled group\/affiliated service group rules. So expect solo 401(k) plans that are. Not in compliance to be audited in the near future.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" Solo 401(k) plans are a great benefit for sole proprietors. I know, I have one. The problem is they are on the Internal Revenue Service\u2019s (IRS\u2019) radar. The IRS\u2019s Tax Exempt and Government Entities division has identified one-participant 401(k) plans … Continue reading