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I’m curious my mother is a US citizen she moved overseas.

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Hello I’m curious my...

Hello I’m curious my mother is a US citizen she moved overseas. She has a 401k from my deceased father that is hers and she withdrew funds for a family emergency this year. She hasn’t lived in the US for a while this whole tax year . We already paid federal taxes on the funds automatically before withdrawal. Does she have to file state taxes ? What state does she file for since she doesn’t live here. She doesn’t work currently.

Submitted: 4 months ago.Category: Tax
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12/28/2017
Tax Professional: Barbara, Enrolled Agent replied 4 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,011
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

As a U.S. citizen, your mother has to report her worldwide income on her U.S. federal tax return even though federal taxes were withheld.

What state did she live in before she moved overseas? Did she change her driver's license? Does she still have a home in the U.S.?

When did she move overseas?

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Customer reply replied 4 months ago
Hi there ,
she moved overseas in May 2015
Yes she lived in Minnesota.
No home in USA.
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

Thank you for the additional information.

Based on that information, no Minnesota state tax return is required to be filed, but she will still have to file a US federal return even though taxes were withheld from the 401K distribution.

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Customer reply replied 4 months ago
Sorry I meant May 2016, does it matter ?
Ok so she just has to complete a federal return then ? She shouldn’t owe anything right because she already paid 20% taxes on this income ... thanks again.
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

No. It doesn't matter if it was 2016.

She should not owe anything if the taxes were previously withheld, but she does have to file a tax return because the IRS receives a copy of the 1099-R that your mother will receive detailing the 401K distribution.

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Customer reply replied 4 months ago
Sorry , So no state required ? Thanks so much. This is very helpful.
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

No state return is required as long as she does not own a home in MN and is now living overseas since 2016.

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Customer reply replied 4 months ago
Sorry for all the questions.. just want to make sure she does this right. so she not required to pay state taxes on this ?
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

There is no need for her to file a state tax return to report the distribution and/or pay state taxes.

Were state taxes withheld from the distribution or only federal? If state taxes were withheld, she will want to file a state return as a non-resident.

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Customer reply replied 4 months ago
No state taxes were not withheld that’s the whole point of my question.
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

Then no state return is required to be filed and no state taxes are due on the distribution.

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Customer reply replied 4 months ago
Ok had she withheld any state taxes she then would have to file state? Right ? Probably get that money back ? Thanks
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

That's right. If state taxes were withheld, she would want to file a state tax return for a refund.

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Customer reply replied 4 months ago
The reason state taxes are not required to be paid or to file is because she’s not living here anymore ? If she Was living here and owned home then they would be ?
I think the 401k company still has her old Minnesota address so
Won’t Minnesota state get record of distribution? How will they know she’s not here? I’m just a bit confused.
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

If your mother moved overseas, she is no longer a resident of MN for tax purposes. That is why I asked you if she still had a home in MN, changed her driver's license, etc.

Your mother may receive a letter from MN because they may believe she is still living in MN because her address of record is MN. She will then have to respond that she moved overseas, when she moved, and provide proof that she is now permanently living out of the country.

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Customer reply replied 4 months ago
Can she do something now to tell Minnesota she permanently has moved ? How can she let them know.
Customer reply replied 4 months ago
Is this the same for all states ? Was she living in a different state before would it be same ?
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

It's the same for all states.

States have no way of knowing that a person moved out of the country, or for that matter, from state to state.

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Customer reply replied 4 months ago
Hello please advise does she have to pay more than 20% federal tax rate she paid when she files ? She had no other income but this. What is the limit amount for 2017 that 20% is sufficient ? My understanding is there is no 10 percent early withdrawal penalty as my mom is below 59 1/2 but it’s my deceased fathers plan.
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

You are correct. There is no 10% penalty even though your mother is under 59 1/2.

20% is the mandatory withholding amount on distributions.

What was the amount that was withdrawn?

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Customer reply replied 4 months ago
153K and she also gets $160.45 from my dads pension per month.
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

The tax due on the $153,000 plus $1,925.40 ($160.45/month) is $33,449.

If your mom had 20% withheld from the 401K distribution, which is $30,600, she will owe $2849 when she files her tax return.

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Customer reply replied 4 months ago
But that doesn’t consider deductions ? What about the standard deduction ?
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

It does include her filing status of single and the standard deduction.

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Tax Professional: Barbara, Enrolled Agent replied 4 months ago

Just following up with you to see if you have any other questions. If so, please let me know so I can continue to help you.

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Customer reply replied 4 months ago
Thank you. What other deductions can she take that are available to her to reduce as much as possible of this tax she has to pay this year ?
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

Unless she itemizes (mortgage interest, real estate taxes, extensive medical bills, etc.) that total more than her standard deduction, there are no deductions.

She should have had a greater percentage (more than 20%) withheld from the distribution.

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Customer reply replied 4 months ago
Is the pension income taxable ? I thought it was already taxed ?
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

If she had taxes withheld from the monthly pension, that will reduce her tax liability by the amount withheld.

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