Will You Owe Taxes?

Some distributions from a retirement plan may be a taxable event.

  • Required Minimum Distributions will require you pay tax on the distributed funds. Regular distributions are a taxable event

  • Required minimum distributions from your Roth 401k are generally not taxable

Required Minimum Distributions

Once you reach age 72, the IRS requires you begin to take withdrawals from your retirement plan. These are known as Required Minimum Distributions (RMDs). The Solo 401k is not exempt from RMDs and even the Roth 401k will require the plan participant take an RMD. It’s important you work closely with your accountant and/or tax preparer to properly calculate your RMD, take the distribution, and pay any taxes owed. The IRS has helpful RMD worksheets here.

Similar to other distributions where you receive the funds, the PAYER will include Solo 401k information and the RECIPIENT will include your information. If your RMD comes from the pretax portion of your Solo 401k, you will owe taxes on the distribution. If you take the RMD from your Roth 401k, you can enter -0- in box 2a. Enter Distribution code 7 in box 7 for your required minimum distribution.

When to File

As the plan administrator, you need to furnish a copy of the form to yourself by February 1st. The IRS needs a copy by March 1st (if you file by mail) or March 31st (if you e-file, which is highly recommended).

Where and How to File

The IRS will not accept a paper filing of IRS form 1099-R. Only approved filers on the FIRE system may file the form. There are numerous helpful online services that will file the form for just a few dollars. Some resources include:

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