Tax on Solo 401k Prohibited Transactions
The initial tax on a Solo 401k prohibited transaction is 15% of the amount involved for each year (or part of a year) in the taxable period. If the transaction is not corrected within the taxable period, an additional tax of 100% of the amount involved is imposed.
Both taxes are payable by any disqualified person who participated in the transaction (other than a fiduciary acting only as such). If more than one person takes part in the transaction, each person can be jointly and severally liable for the entire tax.
Amount Involved. The amount involved in a Solo 401k Plan prohibited transaction is the greater of the following amounts.
Taxable period. The taxable period starts on the transaction date and ends on the earliest of the following days.
Payment of the 15% tax. Pay the 15% tax with Form 5330.
Click on Correcting a Solo 401k prohibited transaction to learn more.
Both taxes are payable by any disqualified person who participated in the transaction (other than a fiduciary acting only as such). If more than one person takes part in the transaction, each person can be jointly and severally liable for the entire tax.
Amount Involved. The amount involved in a Solo 401k Plan prohibited transaction is the greater of the following amounts.
- The money and fair market value of any property given.
- The money and fair market value of any property received.
Taxable period. The taxable period starts on the transaction date and ends on the earliest of the following days.
- The day the IRS mails a notice of deficiency for the tax.
- The day the IRS assesses the tax.
- The day the correction of the transaction is completed.
Payment of the 15% tax. Pay the 15% tax with Form 5330.
Click on Correcting a Solo 401k prohibited transaction to learn more.