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No Longer Self-Employed Solo 401k Eligibility

8/8/2020

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QUESTION:

If I would change my status from schedule C to full-time employee, what should I do with the self-employed solo 401k  account without any tax issues?

ANSWER:

 If you were no longer self-employed, you would need to close the solo 401k plan. Once the business owner is no longer self-employed, he has the following options: 

  • Transfer the Solo 401k to an IRA which is considered a trustee to trustee non-taxable direct rollover. If the solo 401k plan holds alternative investments such as real estate, and cryptocurrency for example, those investments can be moved over in-kin to the IRA.

  • Transfer the solo 401k to a full-time employer 401k provider which  most likely will not allow for alternative investments, just traditional investments such as mutual funds an equities.
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    Author


    George Blower is a principal of My Solo 401k Financial LLC and also serves as the General Counsel with responsibility for providing all legal services to the organization.  

    Prior to joining My Solo 401k Financial, he served as general counsel for a subsidiary of a Fortune 500 financial services company.  

    He received his bachelor’s degree in economics at the University of Michigan in 1998 with honors. He received his juris doctorate from Harvard Law School in 2001. He is a member of the Michigan and Ohio bar associations.

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