Resident Alien/Green Card holder leaving the US; taxes? 401K liquidation options?

[alkemyst]

My wife and I are divorcing. We have been friends and will remain friends, so I am helping her get off and out of here.

She would like to keep the possibility of getting her green card renewed later, so doesn't want to leave without any taxes being covered.

I just got off the phone with IRS and their agent said this is all 'tax planning' which it's not; it's the situation she's going to be in and their are forms we will need to begin handling. I got his supervisors voice mail so hopefully someone calls me back as the hold time was 3 hours.

Anyway, our plan is to file 2012 joint and she will work until about March 2013 under W2 wages. On her termination she has $6500 in a 401K she'd like to move to an account she can access with the least amount of tax liability as possible. The way it looks so far is there is no option for that and she will have to pay the 10% early withdraw and then income taxes on that money.

The tax guy said unless she surrenders her green card she will have to pay US income taxes on all money she earns in Japan while still a green card holder. I have to look into this.

She doesn't plan on coming back to the US permanently, but she has worked here many times on H1B visas in the past so doesn't want to ruin that ability if she goes back into programming.

AFAIK in order to legally leave the US permanently (as opposed to just travel) she will have to file for a Clearance with the IRS and prove she had withholding for the income made up until the time she left, has paid all 2012 taxes (and prior years) and paid any taxes for 401K liquidations.

My second thoughts are if she rolls her 401K over into a new account, can she take a loan against it that she 'pays' herself back on? I haven't heard of this when you are not currently employed as I believe they have to auto draft it out of your paycheck. She doesn't want to touch her Japanese retirement funds as the penalties are just as bad and this 401K she is not so concerned about but doesn't want to lose the money either. She's worries in 10-15 years she won't be able to access it if it's left in the US.

 

[nickbits]

If she keeps her greencard, she has to file us taxes wherever she is. Generally you exclude foreign income but you still have to file. Also if she is away for more than a year she needs to apply for a reentry permit or she may be denied upon returning.
However once she establishes residence in a foreign country, she'll most likely lose her permanent residence status and would have to re-immigrate to return to the us to live.

See http://www.uscis.gov/portal/site/us...nnel=3f443a4107083210VgnVCM100000082ca60aRCRD

Also check out visajourney.com for more info.

 

[blackangst1]

edit: looks like Nick handled the answers.

 

[alkemyst]

If she is willing to come back to America at intervals, what is the timeframe she has to do it/has to stay really?

We'd still be divorced, but she can come back to America on travel.

We fought two years and a ton of cash to get her the green card. She doesn't know if she wants to ever live in the US permanently again, but she doesn't want this battle again.

Also she is not going to pay taxes to America on her foreign income. The asshat I spoke with at the IRS said she'd have to.

 

[quikah]

if she is outside the us for less than 6 months there is generally no issue. If she stays outside the us for more than 6 months but less than a year you might need too show some short of ties to the us. over a year you need a reentry permit. Over two years will probably be impossible.

she needs to file a tax return every year she is going to maintain her permanent residency. According to the law she needs to report her foreign income. Up to her if she does.

 

[dud]

ATOT is definitely the place to get the information you need on important subjects like this.

EVERY member of AT is in an expert in every field imaginable, we offer unbiased, fool-proof advice on subjects we know nothing about.

What does this say about the person who comes here asking for information that they should be seeking from a professional?

 

[lothar]

If she keeps her greencard, she has to file us taxes wherever she is. Generally you exclude foreign income but you still have to file. Also if she is away for more than a year she needs to apply for a reentry permit or she may be denied upon returning.
However once she establishes residence in a foreign country, she'll most likely lose her permanent residence status and would have to re-immigrate to return to the us to live.

See http://www.uscis.gov/portal/site/us...nnel=3f443a4107083210VgnVCM100000082ca60aRCRD

Also check out visajourney.com for more info.

I was under the impression that all foreign income needs to be reported and is taxable, whether you're a US citizen or green card holder?

 

[grohl]

Maybe cause he's a cheap ass MFer?

 

[SwiftWind]

She will have to report her income to the US but she will not have to pay taxes on it if she gets taxed in Japan.

Until her green card expires anyway.

 

[brianmanahan]

What does this say about the person who comes here asking for information that they should be seeking from a professional?

that they are trying to save money because theyre probably going to lose more than half of it?

 

[AMCRambler]

He called the professionals Dud. They're less than helpful as is typical witj most government functionaries. And the boss wouldn't pick up the phone and hasnt called back. Why dont you back out of here and find another thread to crap.

Sounds like a real pain in the ass. How does it work for a person with dual citizenship I wonder? Probably both countries make them pay income tax. Friggin' horse shit. I wish her the best but it sounds like they're going to screw her over no matter what.

 

[alkemyst]

My question is now a bit different and the IRS will not answer it. If she takes her 401K and gives up her green card and permanent residency and any ties to the US, can she liquidate it without a penalty and a future problem coming back to the states?

 

[alkemyst]

ATOT is definitely the place to get the information you need on important subjects like this.

EVERY member of AT is in an expert in every field imaginable, we offer unbiased, fool-proof advice on subjects we know nothing about.

What does this say about the person who comes here asking for information that they should be seeking from a professional?

Personally I'd say you are really discounting ATOT, but then again you should have never posted here.

aware.

 

[alkemyst]

Maybe cause he's a cheap ass MFer?

You live in Dallas Fort Worth. Lolz.

 

[alkemyst]

that they are trying to save money because theyre probably going to lose more than half of it?

Not really, I am paying her way back home. a 401K is not a japanese thing, so she worries about it.

She's going to be talking to a Japanese fund manager this week. She still want's to liquidate it because $6500 would be better for her in cash than as a retirement plan. She's well set for retirement already, but needs to work another 10 years (more wants to work). She needs re-seeding money. In Japan just to rent is expensive as their is a gift money thing. Most people don't move often because of that.

 

[quikah]

I think you will need to talk to a pro, bit of a unique situation. My guess is the IRS is going to want the penalty regardless of her status. Of course if she never comes back to the US they won't go after her for such a small amount. Future visas though could be an issue.

Also, I am going to guess that Japan would want to tax that as well, but I am not familiar with their laws.