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Forums Solo 401k Solo 401k trust to purchase I bonds

  • Solo 401k trust to purchase I bonds

    4 Replies
  • Top ForumsSolo 401k

    Ribhu Agarwala

    December 13, 2021 at 2:10 pm

    On the Treasury Direct website, one has the option to register a Sole Proprietorship account type. If we already use our SSN to purchase the federal maximum $10K in I Bonds, is it legal to use our Solo 401k trust EIN to purchase an additional $10K through that entity?

    Ribhu Agarwala
  • George Blower

    Top SubjectSolo 401k,Solo 401k Contributions
    Top ForumsSolo 401k, Solo 401k Contributions

    George Blower

    George Blower

    Top SubjectSolo 401k,Solo 401k Contributions

    December 14, 2021 at 3:35 am

    Thank you for posting your question!

    1) From a Solo 401k perspective, it is acceptable to invest in the bonds if the account can be set up under the name and EIN of the Solo 401k. Per the website, I note that it appears that accounts can be set up for a trust (note that a Solo 401k is a trust, specifically a federal retirement trust): https://www.treasurydirect.gov/indiv/help/tdhelp/help_ug_292-entityaccountslearnmore.htm#Trust

    2) While buying $10,000 of bonds as an individual as well as through a trust of which the same individual is the trustee and beneficial owner (i.e. the individual’s Solo 401k) is acceptable from a Solo 401k perspective, such an investment may violate the TreasuryDirect terms and conditions.

    • George Blower

      Top SubjectSolo 401k,Solo 401k Contributions
      Top ForumsSolo 401k, Solo 401k Contributions

      George Blower

      George Blower

      Top SubjectSolo 401k,Solo 401k Contributions

      April 22, 2022 at 1:51 pm

      We fielded a related question on this topic in today’s daily webinar. Please check out the video below to see the question and response:

      Investing Solo 401k in US Treasury Direct I Bonds Account – What Name to Use for Entity Registration

      https://youtu.be/KMGJ387ocG8

      • Top SubjectSolo 401k Loan,Solo 401k
        Top ForumsSolo 401k Loan, Solo 401k

        Laura S
        Top SubjectSolo 401k Loan,Solo 401k

        August 10, 2022 at 8:12 pm

        @GeorgeBlower, thanks for your info on this topic.

        1) Can you explain if there are any benefits to buying I bonds from Treasury Direct using the retirement trust’s EIN instead of a personal SSN?

        2) If buying $10,000 worth of I bonds for each ID might violate the IRS rules, it’s not clear to me why I would go through the extra trouble of buying with the trust’s EIN instead of my SSN. Is there a tax benefit I’m not seeing? Something else?

        3) And if I were to use the trust to purchase I bonds, would that eat away at how much I could contribute in the same year to my Solo 401(k) after-tax account?

        Laura S
        • George Blower

          Top SubjectSolo 401k,Solo 401k Contributions
          Top ForumsSolo 401k, Solo 401k Contributions

          George Blower

          George Blower

          Top SubjectSolo 401k,Solo 401k Contributions

          August 12, 2022 at 3:27 am

          First, it is a solo 401k requirement to use the EIN of the Solo 401k when making solo 401k investments.

          Practically, this is beneficial in the instance that any tax reporting is done with respect to the Solo 401k, it will be done with respect to the tax ID for the Solo 401k – if the tax reporting was done under the SSN of the Solo 401k owner the IRS would expect to see such income reported on such individual’s personal taxes (which of course such person will not do since the income is growing on a tax-deferred basis in your Solo 401k).

          This confirms that making Solo 401k investments (whether in iBonds or otherwise) doesn’t impact one’s ability to make Solo 401k contributions.

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