Plan owners of the Solo 401k plan have access to the Solo 401k loan feature. The plan owners are allowed to borrow from the plan to cover their cash needs for up to 5 years. What happens if the plan owners cannot pay back Solo 401k loan and interest within this period? Find out more in this Solo 401k Quick Tip video:
What happens if I can’t pay back Solo 401k loan?
There is no tax or penalty to borrow from your Solo 401k account, as long as you pay back the borrowed amount plus interest on time. In case you cannot pay back the loan as scheduled, the borrowed amount will be treated as an early withdrawal and will be subjected to a 10% tax if you are less than 591/2 years old. There might be some exceptions to this rule. Talk to a tax professional to see if you qualify for any exceptions.