Form 5500ez: Fill & Download for Free

You can transfer the funds into a self-directed account and use the funds to fund your business There are companies that will serve as the trustee for a self-directed account. Apparently TD Ameritrade or Fidelity may be able to do this with a solo 401(k) account. You can google self-directed 401(k) for information.You will not have any tax on the rollover of the funds. Be aware that the 401(k) plan will have to file Form 5500EZ if the balance in the account is more than $250,000, due July 31 of each year.

The fair market value of equipment and training necessary, customary and reasonable for you to produce your code is deductible from the revenue to reduce taxable income. Laptop, desk, chair, cables, testing phones with Apple and Android OS, software tools etc., are all examples of permissible expenses. A percentage of business versus non-business use is applied to the cost to determine the deductible portion.You can also create more expense for your business by deferring taxable income in a Solo401k which allows you to defer up to $56k in 2019 and later borrow back for non-business emergencies up to half of the balance in your Solo401k to a maximum of $50k as long as you repay the loan in five years. The Solo401k lets you self direct how your retirement funds are invested and only has to report its balances once the balance exceeds $250k on a simple form 5500EZ. The Solo401k also lets you retire at 55 years of age instead of 59–1/2 years retirement age required by an IRA, so you can withdraw funds 4–1/2 years earlier without penalty for early withdrawal.My company provides the necessary paperwork and guidance to launch Solo401k plans for self-employed business owners. The fee is $500.Reporting at least $5,600 of taxable income as a sole proprietor will also earn you four out of forty credits needed to qualify for Medicaid Disability insurance. If you keep reporting the annual minimum you will qualify in ten years by the time you reach 25. Although my first tax return was at 12 years of age, I didn’t meet the 40 quarterly credit requirement until I was 28.

If you receive your consulting income as 1099, then you will file a Schedule C with your Form 1040 and you may deduct contributions to a 401(k) plan, a SEP Ira plan and a Profit Sharing 401(a) plan. Your most effective method (largest amount to contribute) will be a plan that has both a 401(k) and a 401(a) component. Get your Net Schedule C amount after your business expenses. Deduct up to $18,000 if you are under 50, add $6,000 of additional catch-up contribution if you are over 60. Then for estimating purposes (as there is a 1/2 SS tax deduction calculation in here as well) 20% of your Net C may also be deducted as a Profit Sharing (401(a) ) contribution. All of these deductions get reported on your form 1040, not your Schedule C. If you are married, you can pay your spouse enough that he/she can also contribute the $18K (or 18K +6k) . Don’t forget to cover the FICA taxes on the spouse and also a 25% Profit Sharing Contribution for spouse. Those deductions go in the Schedule C and have to be done first, as they reduce your Net Schedule C and will affect the total available for your contribution. The 401(k) limits are personal - for however many companies you work, you can only use up $18K annually. The Profit Sharing (401(a)) limits are per unrelated employer. If you work for Giant Company A as an engineer and they make a 10% profit sharing contribution each year, that does not count against the consulting income you earn working as a consultant for Giant Company C in your off hours. Most consultants don’t have employees, but be aware that the rules may change if you hire someone. Once your Plan has $250K in assets you must file the tax reporting form for the plan, form 5500EZ. As soon as you have eligible employees, you must also file the proper reporting form.