Self-Directed 401k Plans
By Jason Watson, CPA
Posted Saturday, November 5, 2023
There are 401k plans that allow you to invest in non-traditional investments such as real estate or buying a business. A common phrase you hear in a ROBS 401k which stands for Rollover for Business Start Ups. It is beyond the scope of this chapter, and frankly it can be a very bad idea although it sounds hip at your next cocktail party. Rob is certainly the operative word since we see a lot of these ideas rob people of their retirement money.
A self-directed IRA is easier to set up and maintain, while a self-directed 401k plan is much more challenging. While these two self-directed vehicles share similar problems and gotchas. Here is a recent post on the pitfalls of self-directed IRAs and 401k plans-
If you want more information, we have worked with Equity Trust and New Direction IRA who can create and help maintain these accounts and plans.
Jason Watson, CPA, is a Partner and the CEO of WCG CPAs & Advisors, a boutique yet progressive tax, accounting and business consultation firm located in Colorado serving small business owners and taxpayers worldwide.
Taxpayer’s Comprehensive Guide to LLCs and S Corps 2025 Edition
This KB article is an excerpt from our 420+ page book (some picture pages, but no scatch and sniff) which is available in paperback from Amazon, as an eBook for Kindle and as a PDF from ClickBank. We used to publish with iTunes and Nook, but keeping up with two different formats was brutal. You can cruise through these KB articles online, click on the fancy buttons below or visit our webpage which provides more information.
 |
 |
 |
| $49.95 | $39.95 | $29.95 |
Talk to a Small Business CPA About Your Situation
Please use the form below to tell us a little about yourself, and what you have going on with your small business or 1099 contractor gig. WCG CPAs & Advisors are small business CPAs, tax professionals and consultants, and we look forward to talking to you!
The tax advisors, business consultants and rental property experts at WCG CPAs & Advisors are not salespeople; we are not putting lipstick on a pig expecting you to love it. Our job remains being professionally detached, giving you information and letting you decide within our ethical guidelines and your risk profiles.
We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. As Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea. In other words, let’s not automatically convert “you can” into “you must.”
Let’s chat so you can be smart about it.
We typically schedule a 20-minute complimentary quick chat with one of our Partners or our amazing Senior Tax Professionals to determine if we are a good fit for each other, and how an engagement with our team looks. Tax returns only? Business advisory? Tax strategy and planning? Rental property support?
Chat With a Tax Pro
Taxes can be tricky. Chat with a WCG human now and get questions answered.
Schedule Discovery Meeting Now
Ready to schedule now and talk about S Corp and reasonable salary and all that gibberish? Let's do it! Here is a link to a Discovery Meeting with one of our Partners or Senior Tax Professionals to understand your tax footprint and objectives, and how WCG CPAs & Advisors might help.
-
Taxpayers Guide to LLCs and S Corps
-
- Basic Business Entities
- Sole Proprietorship
- Single Member Limited Liability Company
- Multi-Member Limited Liability Company
- Partnerships
- Being Considered a Passive Business Owner
- Rental Partnerships
- C Corporations
- Personal Service Corporation
- Professional Corporations and LLCs
- S Corporations
- Section 199A Qualified Business Income Tax Deduction
- S Corp Versus LLC
- LLC Popularity (Hype)
- Formation of an LLC or S Corp
- Nevada Fallacy of an LLC (or Delaware or Wyoming!)
-
- Your Spouse as a Partner (Happy Happy Joy Joy)
- Family Partners
- Real Estate Holding Company and Operating Company
- Parent-Child Arrangement (Income Flows "Up")
- Parent-Child Arrangement (Income Flows "Down")
- Multi-Member LLC That Issues Invoices
- Things to Work Through with Multiple Entities
- Recap of Benefits with Multiple Entities
- State Apportionment with Multiple Entities
- California Multi-Member LLC S Corp Twist
- C Corporation as Mothership
- Holding Company versus Management Company
- Pure LLC Holding Company
- Economic versus Equity Interests
- Structuring Deals with Angel Investors
- ESOPs and S Corporations
- Another Employee Ownership Situation
- Medical C Corp
- Fleischer Tax Court Case
- Joint Ventures
- Loans or Capital Injections
- Using a Self-Directed IRA to Buy a Rental, Start A Business
- Operating Agreements
- Exit Plans, Business Succession
- Liability Protection Fallacy of an LLC
- Charging Orders
- Using a Trust in Your Formation Considerations
-
- Avoiding or Reducing Self-Employment SE Taxes
- Tax Savings with Health Insurance
- S Corp Hard Money Facts, Net Savings
- Ancillary Benefits with S Corporations
- Officer Compensation with Solo 401k Plan Deferral
- W-2 Converted to 1099
- Net Investment Income, Medicare Surtax and S Corps
- Being a Passive Business Owner
- Three Types of Income
-
- Chapter 4 Introduction
- Additional Accounting Costs
- Additional Payroll Taxes
- SEP IRA Limitations
- Trapped Assets
- Distributing Profits, Multiple Owners
- Other W-2 Income
- State Business Taxes (Not Just Income Taxes)
- Deducting Losses, Trapped Cash
- Distributions in Excess of Shareholder Basis
- Stock Classes
- Vesting and Expanding Ownership
- Bad Loans to the S Corp
- Social Security Basis
- Payroll Taxes on Children
- C Corp to S Corp Problems
- Going Concern
- Recap of S Corp Downsides
- Growing Business, Debt Service
-
- Chapter 5 Intro
- Chapter 5 Disclaimer
- Wayfair Case Part 1
- Nexus Theory
- Constitutional and Legislative Standards
- Sales and Use Tax, Income Tax
- Physical and Economic Presence, Nexus Attached
- Wayfair Case Part 2
- Services and Tangible Personal Property (TPP)
- Costs of Performance, Market-Based Approach
- Allocation and Throwback
- FBA, Drop Shipments, Trailing Nexus Revisited
- Recap of State Tax Issues
- State Tax Issues and Nexus
-
- Formation (Election) of an S-Corp
- Electing S-Corp Filing Status, Retroactive for 2025
- Another Option, Dormant S Corp
- Missing Payroll, Now What
- Mid-Year Payroll
- Nuts and Bolts of the S Corp Election
- Ineffective S Corp Elections
- S Corp Equity Section
- Terminating S Corp Election
- Distributed Assets
- 5 Year Rule
- Life Cycle of an S Corporation
-
- Section 199A S Corp Considerations
- Calculating the Qualified Business Income Deduction
- Section 199A Defining Terms
- Specified Service Trade or Business (SSTB) Definitions
- Trade or Business of Performing Services as an Employee
- Services or Property Provided to an SSTB
- Section 199A Deduction Decision Tree
- Section 199A Reasonable Compensation
- Section 199A Pass-Thru Salary Optimization
- Cost of Increasing Shareholder Salary
- Negative Qualified Business Income
- Section 199A Rental Property Deduction
- Qualified Property Anti-Abuse
- Aggregation of Multiple Businesses
- Section 199A W-2 Safe Harbors
- Additional Section 199A Reporting on K-1
- Converting Employees to Contractors and Anti-Abuse
- Section 199A Frequently Asked Questions
-
- S Corp Section 199A Deduction Examples
- Section 199A Side by Side Comparisons
- Section 199A Basic Comparisons
- Section 199A Health Insurance Comparison
- Section 199A 200k Comparison
- Section 199A 250k Comparison
- Section 199A Specified Service Business Comparison Part 1
- Section 199A Specified Service Business Comparison Part 2
- Section 199A Phaseout
- Section 199A Recap
- Section 199A Actual Tax Returns Comparison
-
- Chapter 9 Introduction
- IRS S Corp Stats
- Reasonable S Corp Salary Theory
- IRS Revenue Rulings and Fact Sheet 2008-25
- Tax Court Cases for Reasonable Salary
- Risk Analysis to Reasonable Shareholder Salary
- Reasonable Salary Labor Data
- Assembled Workforce or Developed Process Effect
- RCReports
- W-2 Converted to 1099 Reasonable Salary
- S Corp Salary Starting Point
- Multiple Shareholders Payroll Split
- Additional S Corp Salary Considerations
- Reasonable Salary Recap
-
- Chapter 10 Introduction
- Costs of Operating an S Corp
- New S Corp Puppy, What Do I Do Now
- Accounting Method
- 1099-NEC Issued to Your SSN
- Take Money Out of the S Corp
- Processing S Corp Payroll
- Minimum Payroll with December Bonus
- Taking Shareholder Distributions
- Reclassify Shareholder Distributions
- Shareholder Distributions as Reimbursements
- Accountable Plan Expense Reimbursements
- Accountable Plan Requirements
- S Corp Tax Return Preparation
- Distributions in Excess of Basis
- Minimize Tax or Maximize Value (Economic Benefit)
- Tracking Fringe Benefits
- Other Tricks of the Trade with S Corps
- Adding Your Spouse to Payroll
- Chap 10 - Comingling of Money
-
- Chapter 11 Introduction
- Four Basics to Warm Up To
- Section 199A Deductions – Pass Through Tax Breaks
- 185 Business Deductions You Cannot Take
- Depreciation
- Small Business Tax Deductions Themes
- Value of a Business Tax Deduction
- Deductions the IRS Cannot Stand
- Automobiles and LLCs, S Corps
- Business Owned Automobile
- Section 179 and Bonus Depreciation
- You Own the Automobile, Get Reimbursed By The Mile
- You Own the Automobile, Take Mileage Deduction
- You Own the Automobile, Lease Back to Your Company
- Automobile Decision Tree
- Home Office Deduction
- Tax-Free Rental of Your Home
- Tax Home
- Business Travel Deduction
- Deducting Business Meals
- Sutter Rule
- Cohan Rule
- Capital Leases versus Operating Leases
- Putting Your Kids on the Payroll
- Educational Assistance with an S-Corp - Section 127
- Summary of Small Business Tax Deductions
- Business Tax Return Preparation
- Comingling of Money
- Reducing Taxes
-
- Retirement Planning Within Your Small Business
- Self Employed Retirement Plan Basics
- Retirement Questions to Ask
- Tax Savings and Deferrals
- Using a 401k in Your Small Business Retirement Options
- The Owners-Only 401k Plan
- Having Staff with a Solo 401k Plan
- Self-Directed 401k Plans
- Company-Sponsored 401k Plan
- 401k Plan Safe Harbor Provision
- Roth 401k Plans
- Roth 401k Versus Traditional 401k Considerations
- Two 401k Plans
- Rolling Old 401k Plans or IRAs into Your Small Business 401k Plan
- 401k Loans and Life Insurance
- 401k Plans and Roth IRA Conversions
- Turbo Charged 401k Plans
- SIMPLE 401k
- SEP IRA
- SEP IRA, Roth IRAs and the Roth Conversion
- Controlled Groups
- Owner Only 401k Plans in MMLLC Environment
- Spousal Attribution and Controlled Groups
- Non-Qualified Deferred Compensation Plan
- Exotic Stuff
- Expatriates or Expat Tax Deferral Planning
- Small Business Retirement Planning Recap
-
- Disclosure and Updates
- Gaming the HSA System
- Health Savings Accounts (HSAs)
- Health Care Summary
- Long-Term Care
- Multiple Employees
- One Person Show or Husband-Wife Team, S Corporation
- Section 105 Health Reimbursement Arrangement (HRA)
- Section 125 Cafeteria Plans and Flex Spending (FSA)
- Sole Proprietors and Single Member LLCs
-
Archive
- Articles coming soon
