Solo 401k Withholding Requirements
Solo 401k withholding requirement. If, during a year, a Solo 401k plan pays to a participant one or more eligible rollover distributions that are reasonably expected to total $200 or more, the payer must withhold 20% of the taxable portion of each Solo 401k distribution for federal income tax.
Exceptions. If, instead of having the Solo 401k distribution paid to him or her, the participant chooses to have the Solo 401k plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required.
Estimated tax payments. If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. For more information, see Withholding Tax and Estimated Tax in Publication 575.
Visit Tax on Solo 401k Early Distributions to learn more.
Exceptions. If, instead of having the Solo 401k distribution paid to him or her, the participant chooses to have the Solo 401k plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required.
Estimated tax payments. If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. For more information, see Withholding Tax and Estimated Tax in Publication 575.
Visit Tax on Solo 401k Early Distributions to learn more.