Roth for citizens living abroad

[Guest BED]

Can a US citizen working for a US employer and living abroad make a Roth 401(k) contribution if his income is excluded under section 911? Section 402A(a)(1) says Roth contributions shall not be excluded. Can the expatriate just make a partial election under 911 to include the Roth contribution in compensation?

[Guest mjb]

No. See IRS pub 590 @ P 55 which cross references exclusion of 911 income on P 8. Pub 590 is available at www.irs.gov.

[Guest BED]

Right, Pub 54 says the same thing, no IRA contributions whether regular or Roth. Does this rule apply to Roth 401(k) and regular 401(k) contributions? What effect would such a rule have on ADP testing or 410(b)?

[JanetM]

You seem to want your cake and eat it too. You are getting the ability now to not pay income tax on over $80,000 in income and you also want to save on tax deferred basis. You can't have both.

I have been in your situation twice - 1988 to 1992 I lived in Iceland, and 1994 to 1996 I lived in Germany. Never paid on a penny in income tax on those 6 years worth of income. I funded a brokerage account with the money. After returning to the US I moved some funds from brokerage to IRA. Invest in stocks - you don't pay tax until you sell and capital gains are taxed less. Keep away from stocks that pay dividends and you will have no income to be taxed now.

[WDIK]

JanetM:

Okay, curiosity has gotten the better of me. What were you doing in Iceland?

[JanetM]

I was the financial manager for the USO at Keflavik Naval Air Station. Spent my time 4-wheeling when I wasn't working. Ever seen the sun set but then rise before it touches the horizon? One awesome site to behold.