Hello
I was working in the US until July 1st of this year (and since 2003). Ever since I have been living and working in the UK. I had earned about $46000 gross in my previous company in the US in those 6 months. I have about $20000 in my 401K account. I was planning to transfer all my 401K balances, but when I called Fidelity and explained my situation, the customer service rep said I could avoid the 20% withholding and the 10% penalty if I filled in the Form 8BEN for foreign beneficiaries. Now, after a lot more "forms-reading" and google searches I have still not got all my questions answered. I really hope the experts on this forum will help me
1. I had lived in the USA this year for exactly 182 days and will be in the UK for the remaining 183 days. Can I claim to be a non-resident alien for using the foreign beneficiary form to not withhold 20% off my 401K return ? I believe I can claim to be a non-resident because I was a resident of another country after July 1st. UK-USA seem to have a treaty and it appears there would be 0% withholding on pensions and annuities according to page 37 of publication 515 (https://www.irs.gov/pub/irs-pdf/p515.pdf). I am not sure if I am perhaps interpreting the treaty wrongly
2. Even if the US source (Fidelity) does not withhold tax will I end up paying that when I file tax returns in 2007 for year 2006 ? I dont know if I should file tax return as a dual status alien or a resident alien by virtue of the substantial presence test.
3. Will I have to pay tax in UK for the 401K transfer for funds ? It is really money being transferred from my bank account in USA to bank account in UK. So there is no way the UK tax department would know its 401K money.
I believe if I do not do any of the things above and ask for early withdrawal from the 401K, I could lose as much as $9000 of my $20000 401K fund in taxes and penalties. Would I benefit by withdrawing the money in 2007 instead ? I would prefer to do that only if the money saved is atleast $1000, other wise I may have to bite the bullet and take it out now.
I really am at the mercy of the internet because being in the UK I cannot even approach a US tax advisor. I appreciate the help so much.
Cheers,
Rajiv
他的解决办法：
Sep 19, 2006, 12:13 PM #8
SarahRajiv
Join Date: Aug 2006
Posts: 7
We decided that best alternative for us was to not transfer to a pension fund here but to withdraw out of american 401K every year so that we would be below taxable income but lose the 10% penalty everytime. This would give us the most money, but in our pockets. Ofcourse you would need to file a W8BEN to make sure fidelity does not automatically withhold 20% on tax from this annual withdrawal.
I was told it would be possible to roll-over the 401K plan into my current UK pension plan, but I never bothered to enquire further into it because even if I make a loss, the 401K money is more valuable to me in the next few years as cash than inside a pension fund.
