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I currently have a SEP IRA & Traditional IRA and I'm

Customer Question
Hi,I currently have a...

Hi,I currently have a SEP IRA & Traditional IRA and I'm thinking about either adding a Solo 401K or converting both of my current IRA's into a Solo 401K because I like the idea of being able to self direct and investing in hard assets, the loan option associated with the Solo 401K and the ability to stock away more cash (up to $54K annually). I currently have a LLC that's taxed as a S corp (hope I'm stating this correctly) which I'm a employee of and I receive a income/salary from annually. According to my accountant it will cost me more money to convert to Solo 401K than to stay with my current arrangement. Should I convert, add (solo 401K) or keep current arrangement?Thank you!

Accountant's Assistant: The Expert will know how to help. Is there anything else the Expert should be aware of?

No that's pretty much it. I'd like to know because if Solo 401K is a better move I'd like to get it setup asap and use the loan option

Submitted: 8 months ago.Category: Tax
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Answered in 11 minutes by:
9/27/2017
Tax Professional: Lev, Tax Advisor replied 8 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,985
Experience: Taxes, Immigration, Labor Relations
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If you are looking for consolidation - that will not make any difference in which account you will rollover your funds.
But if you want to have a self-directed IRA - your first step to find the custodial fro that account - and after that you may rollover funds from each of your retirement account directly to that self-directed IRA - so you will use funds fro investment you have in your mind.

.

When we compare SEP and 401k plans - the difference is that SEP contributions do not include employee elective deferrals - so potentially solo 401k will allow larger contributions.

Thus if that what you actually want - the later option is preferable.

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Customer reply replied 8 months ago
I'm not looking for consolidation; I'll have all three if I can and it makes sense. I'd really like to know if I'm going to take a hit if I'm not allowed to have all three and have to consolidate. My accountant said I'd incur a 15.3% hit. I'd like to open the Solo 401K so I can borrow up to 50% of the funds immediatly after opening the account. Does that help?
Customer reply replied 8 months ago
I'm waiting on your call.....
Tax Professional: Lev, Tax Advisor replied 8 months ago

Sorry - I missed your request and it got expired - please submit it again.

You may have as many requirement plans as you want - or you may rollover funds from one to another.

Contributions to SEP are made ONLY by your employer - and such contributions are not subject to employment or self-employment taxes.

This S-corportaion as your employer makes SEP contributions on your behalf based on your wages.

If you have 401k plan - there are two types of contributions - employer's contribution will be similar to one we mentioned above PLUS employee elective deferrals - and that last will be subject to employment taxes.

.

Regarding borrowing from retirement account - SEP doesn't allow borrowing , but 401k plans may but not required to allow borrowing.

That is based on how your retirement account set - you may want to contact the custodial of that plan (or prospective custodial) and verify..

Let me know what amount you are planing to contribute - and we may evaluate what type of plan (or a combination or retirement plans) will be in your best interest.

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Tax Professional: Lev, Tax Advisor replied 8 months ago

I appreciate if you take a moment to rate the answer.

Experts are ONLY credited when answers are rated positively.

If you still have any doubts, need clarification - please be sure to ask.
I am here to help you with all Social Security / Tax related issues.

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