Three Important Deadlines for the Solo 401 k for Small Business
One of the advantages of having a Solo 401k plan for small business is the simplified structure that requires little administrative effort. The plan owner also plays the role of the plan trustee and plan administrator. This gives the plan owner the ability to self-direct their investments, but also gives them certain responsibilities.
In order to keep the Solo 401k plan in compliance, the plan owner needs to learn of different regulations and requirements. Below are three important deadlines that all Solo 401k plan owners need to know:
Deadline to set up a Solo 401 k for small business
To make contributions to a Solo 401k plan for a certain tax year, plan owner needs to have the plan set up by the end of that year.
For example, if you want to contribute to a Solo 401 k for small business for the 2015 tax year, the Solo 401k plan needs to be set up by December 31, 2015. If the plan is set up later than this date, you will only be able to make contributions for the year 2016.
Each year, there is a maximum limit to how much you can contribute to a Solo 401k plan. Therefore, it is important to keep in mind this deadline to maximize your contribution allowance.
Deadline to make contributions
As long as the Solo 401k plan is properly set up, the plan owners will be able to start contributing right away. Many people assume that the contributions have to be made by year-end, however, the contribution deadline is actually a few months later.
The plan owners can make contributions up until the business’s tax-filing due date. This means March 15 of the next year for corporations, and April 15 for sole proprietorships, LLC’s or partnerships. This gives plan owners more time after the year has ended to plan for their contributions.
Deadline to file taxes
Not all Solo 401k plans need to file tax returns. You only need to file taxes for your Solo 401k plan when the total account value reaches $250,000 or higher by December 31. Also, if you close the Solo 401k plan during the year, you will also need to file tax for your plan, regardless of the total value.
To file taxes for the Solo 401 k for small business, you only need to complete and file Form 5500EZ with the IRS. The deadline to file tax for the Solo 401k plan is July 31 of the next year.
It is important to file taxes for your Solo 401k on time. Failure to file Form 5500 EZ by the deadline can lead to penalty as high as $15,000, plus interest.