Updated: Apr 23
One of the key benefits to adopting a self directed solo 401k is having complete control over the plan investments and assets as the plan administrator, trustee, and record keeper. But as such, it is very important that you maintain excellent records and documentation.
There are several main areas to keep track of which are driven by money coming into and out of the account:
- Contribution elections and amounts (Deferral Election Form)
- Rollovers (Rollover Contribution Form)
- Distributions (Distribution Election Form)
- Loans (Loan Application and Promissory Note, along with amortization schedule, repayment terms, tracking repayments, etc.)
- Investments (Maintain all investment-related documents)
- In-plan Roth conversions (In-Plan Roth Rollover Form)
- Record and keep track of investment transactions, profits/losses, K-1 and 1099s, bank and brokerage statements, etc.)
- And more, depending on your situation
This list may seem daunting, but plan providers, such as Nashional Self-Directed, include all of the necessary forms that you’ll need to record and document the movement of funds, as well as informational and instructional letters to aid in the documentation process.
In addition, you might utilize a simple spreadsheet or software such as QuickBooks to help you track the movement of funds. It is also highly advisable to engage your CPA and keep them apprised of what you are doing with the movement of money into and out of your account since it could have a direct impact on your tax situation. They will also need to help you report certain information to the IRS, such as what is found on Form 1099-R if you take a distribution or do a rollover, for example. Knowing how much is held in the plan (not just the individual accounts) is also very important to keep track of so that you know when the balance reaches $250,000 and Form 5500 needs to start being filed with the IRS on an annual basis.
If you’re able to keep consistently good records for your self directed solo 401k plan, you’ll have all of the information that you need at your fingertips to make reporting a breeze.