How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lev Your Own Question

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22648
Experience:  Taxes, Immigration, Labor Relations
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

I am non resident and planning to withdraw from 401k. What

Resolved Question:

I am non resident and planning to withdraw from 401k. What will be my federal, state tax & any penalty. Is penalty not payable in certain situations.

I have USD 48,500 in 401k. I left USA end of last year for Thailand. In 2011, I have only withdrawn USD 5000 from my wife's IRA.


What I really want to know is costs/taxes/penalties associated with withdrawing from my 401k fully or partially.

I am Indian with my wife & daughter as dependents.

I stay in India & Thailand both.


Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

LEV :

Hi and welcome to Just Answer!
If you are a nonresident alien - you will be taxed only on income from US sources.
The distribution from your 401k will be considered as from US sources. To avoid large taxable income - you may spread distributions over several years.
Another option - to transfer distributions into IRA account - and use it as tax deferred investment account.
If you decide to take a distribution and you are below 59 1/2 - generally it will be a subject of additional 10% penalty. The following six exceptions apply to distributions from any qualified retirement plan:



  • Distributions made to your beneficiary or estate on or after your death

  • Distributions made because you are totally and permanently disabled

  • Distributions made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply

  • Distributions that are equal to or less than your deductible medical expenses, that is, the amount of your medical expenses that is more than 7.5% of your adjusted gross income. You do not have to itemize to meet this exception.

  • Distributions made due to an IRS levy of the plan

  • Distributions to qualified reservists.


The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA:



  1. Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions from qualified governmental defined benefit plans if you were a qualified public safety employee (State or local government) who separated from service on or after you reached age 50,

  2. Distributions made to an alternate payee under a qualified domestic relations order, and

  3. Distributions of dividends from employee stock ownership plans.

Customer:

Hi

Customer:

r u there

Customer:

hi

LEV :

Yes - I am here. Please feel free to ask if you need any help.

Customer:

hi

Customer:

first..

Customer:

i am 31 yrs, old..

Customer:

is there any way i can avoid a penalty..

Customer:

of 10%

Customer:

i have medical bills in india and thailand where i stay and travel between.

LEV :

Only exceptions are available that I listed above. You need to verify if any may be used in your situation.

Customer:

ok.

Customer:

do you know the process.

Customer:

of avoiding penalty..

Customer:

do i need to fill a form..

Customer:

etc.

Customer:

is there a form.

Customer:

i am trying to optimize 2 parameters - on one hand early withdrawal and lumpsum..will be high on tax..but on other hand..

Customer:

i will get a good exchange rate and since fixed deposit rates are 10% in indian banks..

Customer:

so i need to understand..

Customer:

if i withdraw..

LEV :

The 10% additional tax is reported on the appropriate line of Form 1040 . You must also file Form 5329 , Additional Taxes on Qualified Plans (Including IRA's) and other Tax-Favored Accounts.
If you claim an exception -
Enter the appropriate exception number on line 2.

Customer:

48500 usd now, what is my tax ?

LEV :

For exception codes - see instructions - page 3 - http://www.irs.gov/pub/irs-pdf/i5329.pdf

Customer:

what if i withdraw..

Customer:

Hi Lev

Customer:

I need a simulation

Customer:

like..

Customer:

Yr/Withdrawal/Assume 10% penalty/Tax

Customer:

what are my exemptions

Customer:

tax credits if any..

Customer:

2 dependents..

Customer:

what is tax rate and variable.

Customer:































































































































Withdrawal amountTax rateTax Amount
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
22000
24000
26000
28000
30000
32000
34000
36000
38000
40000
42000
44000
46000
48000
LEV :

If you take a full distribution $48,000 - and file joint tax return as married filing jointly, and you are nonresident aliens - your estimated income tax liability would be $5340 plus 10% penalty of no exception could be used.

Customer:

only 53404?

Customer:

5340$?

LEV :

Tax rate is based on your total taxable income - see last page in this publication - www.irs.gov/pub/irs-pdf/i1040tt.pdf

Customer:

i am seeing 6366 usd..

Customer:

in your file.

LEV :

As nonresident aliens - you will be able only claim personal exemption $7300. You may not claim dependents who are neither US citizens nor residents of the US.

Customer:

also, i have heard non residents have fixed tax rate

LEV :

Tax rates for residents and nonresidents are same - and based on total taxable income.
You will file tax return 1040-NR - www.irs.gov/pub/irs-pdf/f1040nr.pdf and calculate your tax liability.

Customer:

my daughter is usa citizen

Customer:

can i claim her as dependent.

Customer:

she lives in india.

LEV :

Yes - you may claim your US citizen daugher as a dependent.

Customer:

ok

Customer:

so..

Customer:

from what i understand..

Customer:

we withdrew 5000 usd from my wife's ira account..

Customer:

she can file separately and pay no tax.

Customer:

kindly confirm if correct?

LEV :

That is not correct.

Customer:

then i can file with my daughter as dependent.

Customer:

then will i be filing jointly..

LEV :

You may not file separately and joitly in the same tax year.

Customer:

ok, so for 2011, when i file next year..

Customer:

what will i be doing..

LEV :

If you file a joint return with one dependent - you may take distribution tax free up to $11,000, but still may be liable for 10% penalty.

Customer:

what is distribution tax ..

Customer:

ok..

Customer:

you mean 401k distribution..

LEV :

yes distribution from 401k account.

Customer:

so, assume i have two scenarios for simplicity..

Customer:

second - 5000 usd from wife + 21000 usd from 401k in 2011, 27500 usd from 401k withdrawn on jan 1 2012

Customer:

so, assume i have two scenarios for simplicity..

Customer:

first - 5000 usd from wife + 48500 usd from 401k in 2011

Customer:

what will be my tax & exemption, taxable amount...

Customer:

r u there

Customer:

it is getting late for me. can u pls post your answer here, along with how you calculated tax amount.

Customer:

i will read tomorrow.

Customer:

you can take the whole day to answer..

Customer:

no hurry.

LEV :

If you will take distributions 5000 usd from wife + 48500 usd from 401k in 2011
I am working on calculations - please stay with me...

Customer:

it is 1 am in morning here

Customer:

ok

LEV :

If you will take distributions 5000 usd from wife + 48500 usd from 401k in 2011
if you file joint tax return with your spouse as nonresidents with one dependent.
your estimated income tax liability would be $5545 plus 10% penalty if applicable.

LEV :

Please be aware that is very raw estimate - when you file your tax return - you might itemize and get this amount a little lower.

Customer:

ok

Customer:

but let me know on how you got to 5545$

LEV :

5000+48500-$11000(personal exemption) - then go to tax tables.

LEV :

I am using tax software for estimations.

Customer:

hi lev

Customer:

i will surely accept your response on saturday..

Customer:

pls post your response..

Customer:

you have been great help

Customer:

i need to rest

LEV :

Please post any clarification questions you have.

Customer:

partly in 2011 and 2012..

Customer:

pls let me know scenario 2..partly in 2011 and 2012..

Customer:

and how u calculated tax amount..

Customer:

it would be great help..

Customer:

if you can post..

Customer:

tax software simulation file..

Customer:

like the draft 1040 nr..

Customer:

for both scenarios..

Customer:

approx. is ok..

Customer:

thanks.

Customer:

good nite.

LEV :

If we leave 10% penalty as a separate issue.
You will be able to distribute income tax free up to $11,000 per year without income tax liability.
The amount above will be taxed as a regular income based on tax tables which may be found in this publication - www.irs.gov/pub/irs-pdf/i1040tt.pdf
I am using this tax calculator - http://hrblock.com/free-tax-tips-calculators/tax-estimator.html?fil_st=&wages=&tpage= - but there are many others available online.

LEV :

I am not able to provide the draft of 1040-NR because it will take more time considering the price offered.
If your total distribution 5000+48500=53500 will be equally spread over two years - providing gross income $26750 each year - your estimated income tax liability for each year would be $1580.
For calculations - $26750 - deduct $11,000 personal exemptions - and determine tax liability using tax tables.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22648
Experience: Taxes, Immigration, Labor Relations
Lev and 4 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.