money purchase plan (401k) for foreigner

[Guest pinocchio]

I am a non-resident alien and working in US with H1B visa.

However, I am treated as resident for tax purpose.

My question is what is going to happen for me after I decide to withdraw from the plan and go back to my courtry, Taiwan?

I know that if I do so there will be a 10% penalty withdraw before age 59.5.

The question is beyond that point. I would like to know what are the different ways I can do after I withdraw the money?

Can I just roll it over to Taiwan's pension plan? How's this work and where can I find the rule about this situation?

Or any other alternative way instead of rollover?

What's gonna happen?

Please help me

Any reference will be good.

Thank you VERY MUCH

:confused:

[Guest earthy]

If you are non-resident alien and you earned income and favorably tax sheltered that income during the course of business conducted in the United States, your lump sum distribution from such trust will be taxable to you under Code Section 402(e)(1).

The code sections that govern are 871(B)(1) and 871(B)(2). The 10% premature distribution excise tax would also apply if distributed to you prior to age 59.5.

You need to get with a CPA to see if there is an income tax treaty between your nation of origin and the United States for purposes of other favorable tax treatment and in transferring the plan assets from a US situs trust abroad. Treas. Reg. 301.7701(B)-7(a)(1).

Good luck!

[Guest pinocchio]

as far as I know, there is no treaty between US and Taiwan.

What does this mean?

I still don't get it.

What are the different ways I can do if I withdraw the money and go back to Taiwan?

What are the different ways I can do if I don't withdraw it (I mean just leave it when I have more than 50,000) and go back to Taiwan?

Thanjk you for your help

[basumukherji]

I do not believe there is any I. tax Traety with Taiwan. Taiwan is not listed in IRS Pub. 901.

I recommend that you follow a strategy of deferring the taxes. Rollover the 401k to a self-directed IRA. For opening the IRA, choose an institution with internet access (most of the big name financial institutions such as Fidelity, C.Schwab etc. have that). This way you maintain maximum flexibility to direct your money to mutual funds, stocks, bonds etc. and engage in trading as and when opportunity develops.

In future years when you take money out, you would owe taxes to Uncle Sam. You would be required to file Form 1040NR. There is one withdrawal option called "substantially equal payment" which allows you to take money out of an IRA even before age 59 1/2 without paying the 10% penalty.

You may visit www.irs.gov and use their search for further information.

Good luck

[IRC401]

You need to get some good tax advice:

1. Will you be working for the same controlled group when you return to Taiwan? If yes, you are not able to get your 401(k) money until you reach 59 1/2 or leave the controlled group (although I have seen a plan to the contrary).

2. There are special tax rules that apply to nonresident aliens, and if you are not careful you could end up with a 30% tax that is withheld from your distributions. You may be able to avoid US tax if you take an annuity and may get clobbered if you roll to an IRA. So, get your advice before you roll.

3. Finally, I have no clue how Taiwan will tax your distributions, and that needs to be taken into account.

[Guest pinocchio]

it there any specifit references I should read?

What are they except www.IRS.com

I really want to understand this issue very well if I can.

I need to find out all the alternatives way to handle my issue.

Is't really going to benefit me if I contribute in the future or not. Any suggestion?

Thank you again

p.s. do I need to pay Social Security Tax? I heard some people said no. hmm... so does is mean the employer shouldn't withhold any of my $?