ejw93
Recycles dryer sheets
I researched the same issue with rule 55 for Solo 401k, and here what I got:
1. For rule 55 IRS require you to disengage from the Business that is Sponsor of 401k (Employer)
2. For Solo 401k you are the Sponsor/Employer - being Self-Employed is requirement to open Solo401k.
3. In order to disengage from Self-Employment you need officially close Business that is registered under TIN that used to open Solo 401k, you can not open Solo 401k under SSN.
4. If you close Business, your TIN becomes invalid, your Solo 401k need to be closed and funds distributed/rolled over. You can not keep Solo 401k active if business closed.
Again, that is based on my own research and some conversations with multiple Fidelity advisers couple or may be more years ago.
If someone have better answer and can provide different info - I will be happy to take.
Exit2024 - Yes, this is exactly what has me concerned.
There's no clear IRS guidance on how to document that you have 'retired' from a Sole Proprietorship, so the consensus/safe assumption seems to be to take the brute force action to terminate the business and the EIN (and therefore the Solo 401k). Which means in this case you would be forced to take your Solo401k in one Lump Sum rather than spreading it from ages 55-59.5.
IRS Factsheet 2020-16 indicates a Sole Proprietor is to close the EIN: https://www.irs.gov/newsroom/closing-a-sole-proprietorship
IRS Guidance for Closing a Business echoes this guidance (step 5 is to Cancel the EIN): https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business
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