How To: Preparing Your Solo 401(k) Statement
A self-directed Solo 401(k) puts you in direct control of your plan investments. When you act as trustee for your own 401(k) plan, you get to call all the shots and invest as you best see fit.
The trade-off for this control is that the buck stops with you. You get to wear all the hats. In addition to being the saver participating in the plan, you are also the plan administrator and investment manager.
If you were going to hire someone to manage your investments, you would expect them to provide you with statements and other information related to plan performance. You should expect nothing less from yourself.
Producing an annual statement for your plan does not need to be difficult, but it is an important part of successfully operating your Solo 401(k).
Why You Need a Statement
At this point you might be thinking. “I know what my plan is invested in. Why do I need a statement?”
While it might seem a touch redundant, there are several good reasons to produce a statement for your Solo 401(k).
Valuation. Tracking plan value from year-to-year is required. If your total plan assets exceed $250,000, you are required to file a 5000-EZ return. Fines for failure to file are steep, so you would hate to miss filing because you underestimated your plan value.
Required Minimum Distributions. If you are over age 72, then you are required to take a certain amount from your plan as a distribution. The calculation for required minimum distributions is based on the end-of-year value for the plan. An accurate valuation is necessary to comply with IRS rules.
Performance Tracking. You are your own investment manager. In order to know how your plan is performing, if you are selecting the right investments, and managing those investments effectively, some level of tracking is necessary. The exercise of producing a plan statement helps you take a step back and see how you are doing.
Applying for Loans. If you wish to purchase or refinance a personal residence, the lender will want a picture of your financial standing, including the value of your retirement plans. You will probably need to include a statement for your Solo 401(k) as part of your loan application process.
Estate Planning. When you have an IRA with a brokerage firm, all the investments are tracked by that firm. If you were to die, your plan beneficiaries would be able to contact the firm, take control of the account, and know what the account is holding. With a self-directed Solo 401(k) there is no 3rd party institution holding the investments. As such, it is important for you to keep records of plan holdings to ensure your beneficiaries will be able to take over the operation of your plan.
What To Include
A Solo 401(k) statement does not need to be fancy or formal, but there are certain things you will want to document. We recommend that you include:
Your plan name and address of record
Your name as the plan participant. You should create separate statements for each participant in the plan if your spouse also has an account.
The tax treatment of the account. If you have both tax-deferred and Roth participant accounts with your plan, you will want to document each separately. You can create separate statements or have sub-sections for each account on a single statement.
The date of the statement. You will typically want to produce at least an annual statement that reflects the plans holdings as of December 31st.
A listing of assets that includes the asset name, the asset value at the beginning of the statement period, and the asset value at the end of the statement period. The number of units held should also be reflected for assets where that is appropriate.
Plan contributions, with proper allocation to tax-deferred and Roth accounts if present.
Plan distributions taken during the statement period.
A listing of any rollovers into or out of the plan.
A record of any outstanding participant loans that includes the starting date, maturity date, initial loan amount and outstanding balance.
The total plan value at the beginning and end of the statement period.
How To Value Plan Assets
For general purposes, a reasonably accurate value is sufficient.
If you are performing a Roth conversion, or if your plan is subject to Required Minimum Distributions, you will need a certified value since there are tax implications associated with the value.
For non-cash assets, an estimate of value from a 3rd party with knowledge of the asset class should be used when possible.
- For real property, this will simply be a realtor price opinion (realtor comps). Tax assessed value and online valuation sites such as Zillow are not accurate and should be avoided.
- If the plan owns partial interest in a property or has a mortgaged property, only the equity value held by the Solo 401(k) is reported.
- A note is valued using the outstanding principal balance and any accrued but unpaid interest.
- Cryptocurrencies, commodities, and other similar assets will generally have a market-reportable spot price.
- If the entity holds an interest in a private placement such as another LLC, LLP, etc., the investment sponsor or general partner should provide you with a statement of the entity’s holding value. In many cases the value invested will apply, and income received from the investment will increase your plan’s cash balance.
- A bank or brokerage account within the plan will provide you with a statement value.
If an asset was purchased using a combination of participant accounts within your plan, this should be reflected on your statements. If you funded a note with 60% tax-deferred money and 40% Roth money, for example, the asset would be listed fractionally for each sub-account.
A Sample Statement
You can download a sample statement using the link below.
Sample 401(k) Statement
It is Worth the Effort
Having a statement for your Solo 401(k) plan is valuable in many ways. It may be a little bit of a hassle to create your first one, but once you do you will be glad you did.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
