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News & Tips from an ITIN Acceptance Agent

US IRA tax held and US 401k tax held

Just Breve - US IRA tax held and US 401k tax held
Just Breve - US IRA tax held and US 401k tax held

If you previously worked in the US and had an Individual Retirement Account (IRA) or an employer 401(k) or equivalent employer plan, and you are no longer resident in the US when taking monies from the retirement account, you may have 30% tax held on the distribution as a non resident.

Depending on whether you took a lump sum, annuity or early withdrawal, you may have paid too much tax and will be able to claim some of this back by filing a non resident US tax return (1040NR).

Once the distribution occurs, you will be issued either a 1099-R or 1042-S (more likely). This US tax document will list the gross income and federal tax withheld on the amount received.

Lump sums (single payment of all funds held in the account) are taxed per the UK/US treaty by the US and tax free in the UK.

Annuities are taxed by the UK only and are US tax free per the tax treaty.

If you took an early withdrawal - you may owe a penalty and will need to file to declare this and either pay or get a reduced refund.

In rare occurrences, the US payor may have held zero tax. We have seen this happen several times! On a lump sum, this is wrong and you WILL OWE the tax to the IRS by April 15th the year following distribution.

Whatever the circumstances, Just Breve can assist to both file and obtain a refund for you or advise you of the correct tax payable.

The above rules also apply if you are the beneficiary of a US retirement account (IRA, ROTH or 401(k) or other equivalent).

** Please note if you owe tax and it is paid past the deadline date, penalties and interest will apply **

The IRS only accepts USD cheques or payment via card if you have a US tax number (SSN or ITIN).

If you do not have a US tax number, you can only pay by USD cheque!

Contact Just Breve today:

Tel: 0208 1444632


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