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Where Taxpayers and Advisers Meet

IRA Distribution

Joined:Thu Sep 09, 2021 10:50 am
IRA Distribution

Postby call » Thu Sep 09, 2021 11:14 am

Both myself and my wife lived in the US for a number of years and were Green Card holders. We both also contributed to Traditional IRA's. We returned to the UK in 2007 and subsequently surrendered our Green Cards.We are UK citizens and I believe for US tax purposes we are now regarded as non-resident aliens.

We are now thinking about cashing in our IRA's and taking the distribution as a lump sum.

1. It is my understanding that by taking a lump sum distribution we will not be liable for tax in the UK. Is that correct?
2. By taking a lump sum distribution the investment company holding our IRA's will withold 30% for IRS tax purposes. Is that correct?
3. Are we required to complete any US tax forms? I emphasise the word 'required'.
4. Can we benefit in anyway from the US/UK tax treaty?

I have carried out searches on the forum on this subject but came back with nothing. My apologies then if these questions have been asked before. However I would apprecaite any advice.

Thank you.

Joined:Thu Aug 16, 2012 4:31 pm

Re: IRA Distribution

Postby DavidTreitel » Sat Sep 11, 2021 10:22 am

The 30% is only a withholding tax. The distributions are bifurcated between contributions and growth. Contributions are taxed as effectively connected income. Growth at 30%. You will indeed want to file US returns in the calendar year following the year(s) of distribution.

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