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Barbara
Barbara, Tax Preparer
Category: Tax
Satisfied Customers: 953
Experience:  Tax Preparer for 16 years; 25+ years experience as a real estate/corporate paralegal.
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Hello; I am French and used to work in the states and have

Customer Question

Hello;

I am French and used to work in the states and have a 401K with wellsfargo with 101,000 usd; I am married with a french woman and we have 2 kids born in the states with US citizenship.
I am 43 and left my job in the states; back in france. Kept my 401K open since.
I want to close it totally and withdraw all the money.
What are the steps to follow knowing that since i have been back in france i don't pay taxes since i don't have any revenu. Does it make any difference?
Submitted: 11 months ago.
Category: Tax
Expert:  Barbara replied 11 months ago.

Welcome and thank you for giving me the opportunity to assist you with your tax question

 

Foreign persons are generally subject to U.S. tax at a 30% rate on income they receive from U.S. sources. However, no withholding under section 1441 or 1442 is required on income that is, or is deemed to be, effectively connected with the conduct of a trade or business in the United States and is includible in the beneficial owner's gross income for the tax year.

 

You will complete Form W-8ECI to treat the payment resulting from the withdrawal of your 401K and present it to Wells Fargo to show that you are exempt from the 30% withholding.

 

The following are links to the actual form and its instructions:

 

http://www.irs.gov/pub/irs-pdf/fw8eci.pdf

 

http://www.irs.gov/pub/irs-pdf/iw8eci.pdf

 

Please let me know if I can assist you further.

 

Thank you and best regards,

Barb

Customer: replied 11 months ago.

Thank you Barb,


 


Let me then ask you couple things:


 


- Under point 9 of the W8 form(Specify each item of income that is, or is expected to be, received from the payer that is effectively connected with the conduct of a trade or business in the United States) - what would be appropriate to write?



- and, does it mean that since i am a resident of france, i would then put this amount in my tax declaration here in france?



Thank you

Expert:  Barbara replied 11 months ago.

Hi Patrice,

 

On Line 9, I would write something like "total 401K distribution from Wells Fargo Bank."

 

I am not a France tax expert, but I can research this further for you to see if the 401K distribution would have to be included on your tax declaration in France. May I respond to you later today after I do my research. I realize there is a time difference as I am in the US (Florida) and you are in France.

 

Thank you,

Barb

Customer: replied 11 months ago.

Thank you Barb,


It would be great if you could give me more info on the second part whenever today or tomorrow


Much appreciated


Patrice

Expert:  Barbara replied 11 months ago.

Not a problem, Patrice. I'll get back to you later today.

 

Barb

Expert:  Barbara replied 11 months ago.

Hello again, Patrice.

In France, you are taxed on your worldwide income. Based upon my research, it would initially seem that you would fall into the 41% tax bracket, but that is not the case. First, you are immediately given an allowance of 10% that is NOT subject to tax. Second, the taxable income to be assessed is the total income of the household.

 

To avoid the higher rates of tax where there is a high income, but more than one household member, the family is divided into a number of "parts familiales." The total income is divided by the number of parts. The income tax scale rates are
then applied to this lower figure, and having computed the income tax due, it
is multiplied back up by the number of parts.


For example, in your case, the income of a married couple would be divided into two parts, with an additional half part for each of your first and second children. So
for tax purposes, you are a family of 3 parts.

My points of reference are the following which contain excellent information:

 

http://france.angloinfo.com/money/income-tax/taxable-income/

 

http://www.french-property.com/guides/france/finance-taxation/taxation/calculation-tax-liability/rates/

 

Please review this information and let me know if I can assist you further.

 

Thanks and best regards,

Barb

Barbara, Tax Preparer
Category: Tax
Satisfied Customers: 953
Experience: Tax Preparer for 16 years; 25+ years experience as a real estate/corporate paralegal.
Barbara and 2 other Tax Specialists are ready to help you
Customer: replied 11 months ago.
Barb,

You ave been most helpful,

Thank you

Patrice
Expert:  Barbara replied 11 months ago.

It's been my pleasure, Patrice. Thank you very much for the "excellent" rating of my answers to you. It is most appreciated.

 

Be well,

Barb

Expert:  Barbara replied 11 months ago.
Hi, Patrice.

Here's some additional information you might find interesting.

Under Article 18(b)(I) of the US-France Income Tax Treaty, if a COMPETENT AUTHORITY in France says that the US plan is similar to a mandatory French retirement arrangement, it shall be treated as such. In theory, this means that you could roll your US 401(k) into a French retirement plan, and pay nothing in tax.

By the information contained in your original question, it wasn't clear if you would want to do that, but it may be an option to consider.

Thanks,
Barb

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