A Solo 401(k) is an ordinary 401(k) with one participant. The IRS says it isn’t a new type of plan: it’s a traditional 401(k) covering a business owner with no employees, or that person and their spouse, and it has the same rules as any other 401(k). Opening one comes down to five things: a business with self-employment income, an EIN, a written plan, an investment account, and contributions made on time. This guide covers the steps in order. For how much you can put in, see the 2026 contribution limits, and to decide between this and a SEP, read Solo 401(k) vs. SEP IRA.
Who can open one
You can if you have net earnings from self-employment in the business the plan is set up for. Publication 560 says you can make contributions on your own behalf only if you have those earnings. A freelancer who reports on Schedule C qualifies. If you run an S corporation, contributions are based on your W-2 pay and the math differs, so ask a tax professional.
Employees change the picture. The IRS says a business owner with no common-law employees doesn’t need to do nondiscrimination testing, and that this advantage vanishes if you hire. Under Publication 560, an employee generally has to be allowed to participate once they are 21 and have a year of service, with extra conditions for 401(k) plans. If you plan to hire, a SEP or a different plan may fit better. A spouse who earns income from the business can join the plan; the guide on spouses in a Solo 401(k) has the details. If you also have a job with a 401(k), see Solo 401(k) and a 401(k) at work.
The steps, in order
1. Get your EIN
Most providers want your business’s EIN on the plan paperwork, and the IRS asks for it on the plan’s annual return. It’s free and online. The EIN guide explains when you need one and what to do if your provider asks for a separate EIN for the plan’s trust.
2. Choose a provider
You need a bank, brokerage or other firm that offers a plan for one-person businesses. Publication 560 says most qualified plans follow a standard form approved by the IRS, a pre-approved plan, which banks, mutual funds, insurance companies, third-party administrators and others provide. The next section lists what to compare.
3. Adopt the written plan
Publication 560 says there are two basic steps: adopt a written plan, then invest the plan assets. The plan must be in writing. With a pre-approved plan, this is usually an adoption agreement that you sign with the provider. Expect it to ask for your business name, EIN, plan name, the plan year and the options you want, such as Roth deferrals and loans. The exact form depends on the provider.
4. Open the investment account
The plan assets have to be held somewhere. Publication 560 says you can establish a trust or custodial account to invest the funds, or buy an annuity contract. In practice, the provider opens a trust or custodial account in the plan’s name, and it’s that account you contribute to and invest from. Keep it separate from your personal accounts and your business checking account.
5. Make your contributions
You wear two hats, employee and employer, and you contribute in both. The employee deferral is what you choose to defer from your earnings, and the employer contribution is a share of your compensation on top. The limits and the self-employed formula are in the contribution limits guide. Pre-tax contributions, both kinds, are deducted on Schedule 1 of your return as an adjustment to income; Roth deferrals aren’t.
6. Keep up the paperwork
Keep the plan document, each year’s contribution records and the account statements. File Form 5500-EZ when the plan is large enough (below).
2026 deadlines
| What | Deadline | Rule |
|---|---|---|
| Adopt the plan to elect 2026 employee deferrals | December 31, 2026 | Publication 560: to deduct contributions for a tax year, set up the plan by the last day of that year |
| Elect your 2026 employee deferral in an existing plan | Elect by December 31, 2026; the money can go in by the return due date, including extensions | Publication 560: owner-employees |
| New plan adopted after year-end: first plan year only | April 15, 2027, the return due date without extensions | Publication 560, SECURE 2.0 section 317, IRS issue snapshot |
| Employer contribution for 2026 | October 15, 2027, the extended due date, even if you file your return earlier | Publication 560, IRC 404(a)(6) and the IRS issue snapshot |
| Form 5500-EZ for the 2026 plan year | August 2, 2027, or October 15, 2027 if you extended your income tax return, when plan assets exceed $250,000 at the end of 2026 (file if you're at the line) | Instructions for Form 5500-EZ |
Adopt the plan to elect 2026 employee deferrals
- Deadline
- December 31, 2026
- Rule
- Publication 560: to deduct contributions for a tax year, set up the plan by the last day of that year
Elect your 2026 employee deferral in an existing plan
- Deadline
- Elect by December 31, 2026; the money can go in by the return due date, including extensions
- Rule
- Publication 560: owner-employees
New plan adopted after year-end: first plan year only
- Deadline
- April 15, 2027, the return due date without extensions
- Rule
- Publication 560, SECURE 2.0 section 317, IRS issue snapshot
Employer contribution for 2026
- Deadline
- October 15, 2027, the extended due date, even if you file your return earlier
- Rule
- Publication 560, IRC 404(a)(6) and the IRS issue snapshot
Form 5500-EZ for the 2026 plan year
- Deadline
- August 2, 2027, or October 15, 2027 if you extended your income tax return, when plan assets exceed $250,000 at the end of 2026 (file if you're at the line)
- Rule
- Instructions for Form 5500-EZ
The 2027 dates are the ordinary April 15 and October 15 return dates; the Form 5500-EZ due date is the last day of the 7th month after the plan year ends, July 31, 2027, which is a Saturday, so the instructions' next-business-day rule gives Monday, August 2. Elective deferrals in a new plan adopted after year-end must be paid to the plan before the return due date, without extensions.
Two points explain the table. First, the usual rule is that elective deferrals can’t be made retroactively, because they come out of compensation you haven’t yet received. The IRS issue snapshot says a cash or deferred arrangement must be established before compensation can be deferred. Second, SECURE 2.0 section 317 carved out an exception for the freelancer who is just starting out: an individual who owns the entire interest in an unincorporated business and is its only employee can adopt a new 401(k) after year-end and, for the first year only, elect to defer the prior year’s net self-employment earnings until the return due date, not counting extensions.
The employer side is more forgiving. Since 2020, IRC 401(b)(2) lets an employer establish a plan retroactively if it’s adopted by the return due date including extensions, and the employer can make and deduct profit-sharing contributions up to that date. Matching contributions can’t be made on pay earned after the end of the year. So if you miss both December 31 and April 15, a plan adopted by October 15, 2027 on an extended return can still receive an employer contribution for 2026, but not an employee deferral. The October 15 deadline guide covers the same idea for 2025.
Roth contributions and loans
Two features depend on the plan document, not on the law alone.
Roth. The IRS says a plan must be amended to offer designated Roth contributions, with separate accounts and a choice between pre-tax and Roth deferrals. Roth deferrals are taxed now, so there’s no deduction, and they use the same overall limit as pre-tax deferrals. Qualified distributions are tax free if made at least five years after the year of your first Roth contribution (counting that year as the first) and on or after age 59½, on disability or on death. Publication 560 adds that SECURE 2.0 lets plans allow certain nonelective and matching contributions made after 2022 to be designated as Roth, again if the plan offers it. For what each type costs in tax this year and how to compare them, see Roth vs. Traditional Solo 401(k).
Loans. Plans may offer loans but aren’t required to. IRAs and SEPs can’t. The maximum is the smaller of 50% of your vested balance or $50,000, with an exception of up to $10,000 that plans aren’t required to include. You generally repay within five years with payments at least quarterly. If you miss them, the balance is treated as a distribution and can be taxed and may be subject to the 10% early distribution tax, the IRS says. Whether a loan is a good idea is a different question.
What to compare in a provider
The IRS doesn’t publish provider fees or features, and they change, so I’m not ranking providers here or naming any. Ask for the plan document and fee schedule, and compare these.
| Question | Why it matters |
|---|---|
| Is it an IRS pre-approved plan? | Publication 560 describes this as the standard route |
| Does the plan allow Roth deferrals, and Roth employer contributions? | Not every plan does, and it has to be written into the document |
| Does it allow loans? | Plans aren't required to offer them, and the terms are in the plan |
| Will you let me adopt after year-end and elect prior-year deferrals? | That is the SECURE 2.0 exception for a new plan; check the provider's process and cutoff dates |
| What does it cost? | Ask about setup, annual and per-account fees, investment costs and any charge for Form 5500-EZ help |
| Can my spouse join, and what if I hire? | The plan and the testing rules change once there are employees |
| Does it accept rollovers in, and how are contributions made? | Convenience and timing of employee and employer deposits |
| Does it help with Form 5500-EZ? | The return is due once assets pass $250,000 |
Is it an IRS pre-approved plan?
- Why it matters
- Publication 560 describes this as the standard route
Does the plan allow Roth deferrals, and Roth employer contributions?
- Why it matters
- Not every plan does, and it has to be written into the document
Does it allow loans?
- Why it matters
- Plans aren't required to offer them, and the terms are in the plan
Will you let me adopt after year-end and elect prior-year deferrals?
- Why it matters
- That is the SECURE 2.0 exception for a new plan; check the provider's process and cutoff dates
What does it cost?
- Why it matters
- Ask about setup, annual and per-account fees, investment costs and any charge for Form 5500-EZ help
Can my spouse join, and what if I hire?
- Why it matters
- The plan and the testing rules change once there are employees
Does it accept rollovers in, and how are contributions made?
- Why it matters
- Convenience and timing of employee and employer deposits
Does it help with Form 5500-EZ?
- Why it matters
- The return is due once assets pass $250,000
No provider is named or ranked here. Fees and features are set in each provider's plan documents and fee disclosures, so read those for the date you open the plan.
Form 5500-EZ
A one-participant plan files Form 5500-EZ when its assets are large enough. The instructions say you don’t have to file for a plan year if the total assets of your one-participant plans at the end of that year don’t exceed $250,000, unless it’s the plan’s final year. If you’re above that, you file for each one-participant plan you maintain. The IRS plan page words it as a plan with $250,000 or more in assets, so file if you’re at the line. The return is due by the last day of the 7th calendar month after the plan year ends. There are two ways to get more time. The instructions say you’re automatically granted an extension to the extended due date of your income tax return, without filing Form 5558, if the plan year and the employer’s tax year are the same, the employer has been granted an extension to a date later than the normal Form 5500-EZ due date, and a copy of the extension application is kept with the plan’s records; you check the “automatic extension” box on the form. For a calendar-year plan and a 2026 return extended with Form 4868, that means October 15, 2027. Otherwise, Form 5558 gives a one-time extension of up to 2½ months if filed by the normal due date. A late return costs $250 a day, up to $150,000 per plan year. The IRS also says a filer with at least 10 returns in a year must file Form 5500-EZ electronically. Most new Solo 401(k)s are well below $250,000, so you’ll often have no return for the first years. The EIN guide has more on penalties and relief.
A worked example: the $80,000 freelancer
This is the freelancer from the deductions and first-time filing guides: single, under 50, $80,000 of revenue, $15,450 of expenses, so $64,550 of net profit. State tax isn’t included.
| Solo 401(k) | SEP IRA | |
|---|---|---|
| Employee deferral | $24,500 | $0 |
| Employer contribution | $11,998 | $11,998 |
| Maximum total | $36,498 | $11,998 |
Employee deferral
- Solo 401(k)
- $24,500
- SEP IRA
- $0
Employer contribution
- Solo 401(k)
- $11,998
- SEP IRA
- $11,998
Maximum total
- Solo 401(k)
- $36,498
- SEP IRA
- $11,998
From the same function as our Solo 401(k) vs. SEP IRA calculator. Compensation for the plan is $59,989: profit of $64,550 less half of self-employment tax ($4,561). The employer share is 20% of that compensation.
The room is there, but putting away $36,498 out of $64,550 is a lot of cash. Here is what a smaller and a maximum contribution do to the federal tax, from the freelance tax calculator engine.
| No plan | $21,998 | $36,498 | |
|---|---|---|---|
| Deducted on Schedule 1, line 16 | $0 | $21,998 | $36,498 |
| Adjusted gross income | $59,989 | $37,991 | $23,491 |
| QBI deduction | $8,778 | $4,378 | $1,478 |
| Federal income tax | $3,965 | $1,854 | $591 |
| Self-employment tax | $9,121 | $9,121 | $9,121 |
| Total federal tax | $13,086 | $10,975 | $9,712 |
Deducted on Schedule 1, line 16
- No plan
- $0
- $21,998
- $21,998
- $36,498
- $36,498
Adjusted gross income
- No plan
- $59,989
- $21,998
- $37,991
- $36,498
- $23,491
QBI deduction
- No plan
- $8,778
- $21,998
- $4,378
- $36,498
- $1,478
Federal income tax
- No plan
- $3,965
- $21,998
- $1,854
- $36,498
- $591
Self-employment tax
- No plan
- $9,121
- $21,998
- $9,121
- $36,498
- $9,121
Total federal tax
- No plan
- $13,086
- $21,998
- $10,975
- $36,498
- $9,712
Each column is a separate run of the same function: single filer, no other income, 2026 rates. The $21,998 column is a $10,000 employee deferral plus the $11,998 employer contribution; $36,498 is the maximum. Traditional (pre-tax) contributions assumed; Roth deferrals aren't deducted.
A $21,998 contribution lowers the federal bill by $2,111, and $36,498 by $3,374. Self-employment tax doesn’t move, because the deduction comes after it. The QBI deduction shrinks as the contribution grows, so the saving is less than a straight bracket rate would suggest. And a saving of $3,374 means you’ve locked away $36,498, not that you’ve gained $3,374. If you’re not sure how much to put in, Saving for Retirement on Irregular Income covers a percentage-based approach. Run your own numbers with the Solo 401(k) vs. SEP IRA calculator and the Solo 401(k) calculator.
First-year mistakes
- Waiting for the tax return to decide. Employee deferrals have to be elected by year-end, unless you use the first-year exception. After that, the window closes on December 31.
- Forgetting the shared deferral limit. If you also have a job plan, your deferrals add up across both. The 401(k) at work guide shows the split.
- Contributing more than you earned. Contributions on your own behalf depend on your net earnings from self-employment, so a bad year shrinks the cap.
- Skipping the EIN, or entering a Social Security number where the plan needs the EIN.
- Mixing money. Contribute from your own account into the plan’s account, and treat plan money as separate from your everyday funds. Taking money out follows the plan’s rules, such as the loan limits above.
- Missing Form 5500-EZ once assets pass $250,000. The penalty is $250 a day.
- Hiring without checking the plan. Eligible employees may have to be included, and testing starts.
- Counting the deduction as savings. It lowers your tax; it doesn’t give you cash.
Checklist
- Self-employment income for the year, and a rough profit figure.
- EIN in hand.
- Provider chosen, with the plan document and fee schedule read.
- Plan adopted and signed, with Roth and loan options decided.
- Investment account open in the plan’s name.
- Employee deferral elected by December 31, or by the return due date if this is the first year of a new plan.
- Employer contribution calculated, and paid by the return due date.
- Contributions recorded for Schedule 1, line 16.
- Calendar reminder for Form 5500-EZ once assets near $250,000.
How we got these figures
The eligibility description, the $250,000 threshold and testing come from the IRS one-participant 401(k) page, reviewed April 9, 2026. The set-up deadline, owner-employee deferral timing, the first-year exception and the pre-approved plan and account rules come from Publication 560 (2025), the timing rules from the IRS issue snapshot on contributions after the end of the tax year, the due date, penalty and extension from the Instructions for Form 5500-EZ (2025), Roth from the IRS designated Roth page and loans from the IRS loans page, all of which we opened on October 10, 2026. The 2026 limits are from IR-2025-111 and Publication 560. The 2027 dates are the ordinary April 15 and October 15 return dates. The example is our own arithmetic, run through the same functions as our retirement and freelance tax calculators. For how we choose and check sources, see How We Research.
This is general information, not tax or investment advice for your situation. Your plan document controls what your plan allows, and a tax professional can confirm the details before you contribute.
