QUESTION: Thanks for the information. I have a question prior to opening a solo 401k account and transferring my SEP IRA. Yet I have not made contribution to my SEP IRA for the year ending in 2014, as I have filed for income tax filing extension. I am wondering if I should first contribute to my SEP IRA and then roll it over to SOLO 401K or shall I roll over my existing SEP IRA money to my new SOLO 401K and then contribute the fund for 2014 to the new solo 401 k plan. The reason I am asking is that I remember some confusion regarding not able to roll over the account and/or regarding not able to contribute for previous year to the new account established after the year is over.I will appreciate your clarification.
ANSWER: Good question. You will want to first make the 2014 contribution to the SEP IRA. Subsequently, you can transfer the SEP IRA to the new solo 401(k). The reason you cannot make the year 2014 contribution directly to the new solo 401(k) is because the Solo 401(k) was not open until this year- 2015. Unlike a solo 401k where it has to be adopted by 12/31 in order to make contributions up until the business tax return due date plus any timely filed extensions, a SEP IRA can be opened and funded for the prior year as long as it is opened by the tax return due date plus any timely filed extensions. See IRS Publication 560 for more information on this.
Additional Information
SOLO 401k FAQs
Solo 401k Contribution Rules
ANSWER: Good question. You will want to first make the 2014 contribution to the SEP IRA. Subsequently, you can transfer the SEP IRA to the new solo 401(k). The reason you cannot make the year 2014 contribution directly to the new solo 401(k) is because the Solo 401(k) was not open until this year- 2015. Unlike a solo 401k where it has to be adopted by 12/31 in order to make contributions up until the business tax return due date plus any timely filed extensions, a SEP IRA can be opened and funded for the prior year as long as it is opened by the tax return due date plus any timely filed extensions. See IRS Publication 560 for more information on this.
Additional Information
SOLO 401k FAQs
Solo 401k Contribution Rules
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