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Financial Products

Questions about financial product options? Find discussions around a wide variety of financial service products here. Looking for your first debit card or a seasoned saver looking for tips to build your bank account, this is a great place to share and learn.

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Pioneer
Posts: 2
Registered: ‎08-15-2017

401K withdrawal from foreign land

I am a 40 Y.O. non-US citizen who was sent there by the company I work for. 

I had been contributing in 401K between 2006 and 2010 - and then I left USA.

Right now I am in Netherlands and have changed my company as well. I was wondering if the money which is lying idle there could be withdrawn with the minimum penalties etc. It is not a lot of money hence I would like to keep it without sharing with IRS :-)

Any suggestions?

Tax Pro
Posts: 5,777
Registered: ‎02-23-2016

Re: 401K withdrawal from foreign land

Hi TamalD,

 

Welcome to the H&R Block community.

 

It is not going to be possible to completely avoid paying tax on your retirement savings as a 401(K) account is tax-deferred, not tax-free.  You'll owe federal income tax no matter what unless your income is below your filing threshold (which is $10,400 for single taxpayers), but you can avoid the 10% early withdraw penalty by withdrawing the funds in equal installments over a minimum of either five years or until you turn 59 and 1/2, whichever comes first, and that will minimize your tax liability.

 

There are other exceptions to the penalty as well, but I think you will most likely qualify for the equal installment exception since you would have to be going to school here or you would have to be purchasing a home here to qualify for one of the other ones.

 

You'll have to file a U.S. tax return for the year(s) in which you withdraw your funds, so if you don't have an individual taxpayers identification number (ITIN) I would recommend getting one now if you can so that you're ahead of the game.  You can get an ITIN through a certified acceptance agent at any time or you can get one by attaching Form W-7 to your tax return when you file it.  According to the IRS' master list there are actually 2 certified acceptance agents in the Netherlands that can help you and I've included their information below.

 

Christine Dahl LLC
d/b/a Christine Dahl Financial Services
Prinses Margrietplantsoen 33
The Hague South Holland 2595AM
Netherlands
3162 9622544
Heerema Marine Contractors Nederland SEVondellaan 55
2332 AA Leiden
Netherlands
3107 1599000
Pioneer
Posts: 2
Registered: ‎08-15-2017

Re: 401K withdrawal from foreign land

Dear Louis,

 

I already have the SSN. I had received it in 2004 on my first visit in USA. So, do I still need to apply for an ITIN?

 

Secondly, as you have mentioned - I need to file Federal income tax for which threshold income is $10,400 for single taxpayers - is it my US income only or my global income?

 

And you are right, I am planning to purchase a house here in Netherlands and thats why I am willing to take this fund out of US and make it productive. 

 

With your answers to the above questions, I will be able to judge my situation better and plan whether to withdraw or not. 

 

Tax Pro
Posts: 5,777
Registered: ‎02-23-2016

Re: 401K withdrawal from foreign land

Hi TamalD,

 

Since you already have a social security number you will not need an ITIN number.  Don't worry about applying for an ITIN.  File your tax return(s) using your social security number.

 

The filing threshold is your taxable income.  If you have less than $10,400 in U.S. source funds then you won't owe any federal income tax (when you are a U.S. citizen your foreign income is excludable up to $101,000 if you lived & worked in your other country for more than 330 days out of the year, and when you are a non-resident alien your foreign income is generally not taxable), which is yet another reason why you may wish to withdraw your funds over a few years instead of all at once.

 

Note that you still have to either clear the early withdraw penalty by filing Form 5329 or pay the penalty as it is separate from the federal income tax, so you'll have to file a tax return whether or not your taxable income exceeds your filing threshold.

 

Louis