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.