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Bill
Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3078
Experience:  EA, CEBS - 34 years experience providing financial advice
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I have $150,000 in an IRA account, and my husband and I have

Customer Question

I have $150,000 in an IRA account, and my husband and I have another $150,000 in a 401(k) plan that is through our S Corp. I need about $75,000 for a business, also an S Corp., that we own to remodel a building we bought. We are cash poor at this point, and if we could use our own money, that would be so helpful. If we could put a note into a self-directed IRA, we could easily make monthly payments (could we make it a high interest rate, like 15%?). It is frustrating to need funds, and not be able to help ourselves for a business that we have been operating for over 3 years (it's a salon). Our CPA said we couldn't borrow against our 401(K) because it is our corporation, or something like that. Can you give us any creative solutions? We are not looking to skam the system...we want to replace those funds; we are 55 and 52, and would love to do this, especially if we could pay a high interest rate. We do not want to get ourselves into trouble with IRS, that's for sure!
Submitted: 5 years ago.
Category: Tax
Expert:  Bill replied 5 years ago.

If your 401(k) plan permits loans (if not then amend the plan to permit them for any reason) then each of you can borrow from your accounts up to the lessor of 50% of your account balances or $50,000. If you want to borrow $50,000 from your account but your balance is less than $100,000 then you could rollover your IRA to your 401(k) (assuming your plan accepts rollovers from any source, if not then amend the plan) to increase your account balance. Only funds in your IRA that have never been taxed can be rolled over. If you have any after-tax funds such as nondeductible IRA contributions then these cannot be rolled to the 401(k). Assets in the 401(k) would have to be sold in order to issue you checks for the loans. Once you receive the checks from the 401(k) then you could use the funds to invest in your business. You would need to sign a note for the 401(k), have an amortization schedule for your loan repayments which would have to be repaid on at least a quarterly schedule, and repay the loan over no longer than a 5 year period.

 

http://www.nysscpa.org/cpajournal/2005/305/essentials/p48.htm

 

 

http://www.irs.gov/retirement/sponsor/article/0,,id=151926,00.html

 

http://www.mhco.com/Library/Articles/2006/QL_Basic_Loan_Rules_100606.html

 

Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3078
Experience: EA, CEBS - 34 years experience providing financial advice
Bill and 2 other Tax Specialists are ready to help you
Customer: replied 5 years ago.
Bill, I am so sorry for the delay in accepting your answer! I guess I forgot about it, and my husband probably shut off the computer when it indicated an answer. Thanks for your help. I will research the web sites you gave me.

Have a Happy New Year!

DJSmile
Customer: replied 5 years ago.
I think I just mad a mistake and added $10 for this answer. Could you cancel that, if that is the case?
Expert:  Bill replied 5 years ago.
I will forward this to a moderator.
Customer: replied 5 years ago.
It looks to me like I have already accepted this answer. Would you please research?
Thank you.
DJ
Expert:  Bill replied 5 years ago.
I will forward to a moderator to research.
Customer: replied 5 years ago.
I am fairly certain this has already been accepted and paid. Could you check the records?
Expert:  Bill replied 5 years ago.
Yes, you accepted. I will forward to customer service to research.

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