Do I Need An EIN To Open A Solo 401k?

When you open a solo 401k, one of the things you’ll be asked for is your Employer Identification Number (EIN). This guide explains the EIN requirements for opening a solo 401k, as well as details on how to apply for an EIN separately for your solo 401k account trust.

What is an Employer Identification Number (EIN)?

Also known as a Federal Tax Identification Number (FIN), an Employer Identification Number is a unique nine-digit number used by the IRS to identify your business entity or trust. Think of it like a social security number for your business. If you have a business registered under your social security number, but no EIN, there’s no easy way for the government to separate your business from your personal identity.

An EIN is required to run a business to file taxes, open bank accounts, and apply for credit. Applying for one is free, and can be done through the IRS website. It only takes a few minutes to fill out the application, and the IRS usually will issue them immediately.

Do I need an EIN to open a solo 401k?

If your business is incorporated, it’s likely you’ve already registered an EIN for your business in the past. When you apply for a solo 401k, you would use your business’ EIN.

However, some sole proprietorships don’t have an EIN and just operate their business using their Social Security Number. While it’s possible to use your SSN rather than an EIN to open a solo 401k, it could complicate things because a solo 401k is an employer-sponsored retirement plan. Having an EIN allows the IRS to be able to identify your business separately from your personal account.

A solo 401k needs its own EIN

While you don’t need an EIN to open an account, your solo 401k will need to apply for its own EIN, separate from your business.

A solo 401k is a retirement trust, which makes it an entity that’s separate from your business. The same way that a business needs an EIN to operate, a solo 401k plan also requires its own EIN for tax filings, opening a bank account, and opening a brokerage account. Investments through your solo 401k are owned by the 401k trust, not by you or your business. When you sell an asset, the IRS is able to tell that the funds are deferred since it’s owned by your solo 401k trust.

You need an EIN for filing Form 5500-EZ

The only annual tax filing requirement for a solo 401k is Form 5500-EZ. Any solo 401k plan with assets over $250,000 is required to file one each year. In order to file Form 5500-EZ, you’ll need to provide an EIN. While you could open a solo 401k without an EIN, it’s better to just get one now while you’re in the process of applying so that you don’t have to worry about it later – especially given how easy it is to apply for one.

How do I get an EIN?

You can apply for an EIN directly through the IRS website. Applying takes just a few minutes and the IRS will usually approve and issue your EIN instantly.

For obtaining an EIN for your solo 401k, some plan providers will take care of it for you. If you prefer to do it yourself, the process is the same as when you applied for your business EIN.

Instead of selecting a business entity, you would select “View Additional Types” in the first step.

On the next page, you would select “Employer Plan (401K, Money Purchase Plan, etc.)“.

When you’re done, the IRS will provide you an EIN specifically for your solo 401k trust. You can use this EIN to open separate bank and brokerage accounts under your solo 401k. If you have trouble, ask your plan provider for help.

Wrapping Up

If you don’t have an Employer Identification Number for your business, a solo 401k account can technically be opened without one using your Social Security Number. Most businesses will already an EIN, especially if you’re incorporated.

An EIN is required for any business entity or trust to do things like open a bank account, open a brokerage account, and apply for credit. A solo 401k is a retirement trust, and requires its own EIN separate from your business. The good thing is, getting an EIN is easy and takes just a few minutes.