Tax help for non-US citizens who have assets in the US?

[shawnab]

I lived and worked in the US on a student visa for 7+ years. Meanwhile I have investment accounts, IRAs, 401k and a HSA here.

My visa is expiring once again and I may leave the US permanently. No idea what to do with my accounts before (or after?) I leave.

I want to arrange things so that I minimize taxes when "extracting" my money from the US. In the long term, I also don't want to do any US paperwork ever again as it has been a huge pain in the a** (to put it mildly).

Reading up on this I am getting a lot of conflicting advice, and most of the expat tax advice is geared towards US citizens. None of this applies in my case.

Do you have any resources that may help me learn more about this and come up with a good exit plan?

I'd also be happy if you can recommend a tax accountant who specializes in international tax stuff. I'm happy to pay a fee to do things right.

Personal stories if you have left the US as a non-citizen are also welcome.

Thanks!

 

[tyler112]

@shawnab Where your tax home moves to is relevant, e.g., tax treaty, SS totalization, and restrictions on investment (e.g., EU PRIIP). It also makes a difference if there's a chance you may return to live in the US later (e.g., for retirement).

Taxable investment accounts you'd generally transfer in-kind to a local brokerage, as most US brokerages are not allowed by SEC to hold non-retirement accounts for non-resident clients.

401k/IRA may, as allowed by treaty, continue with its tax-deferred status, until you take distributions in retirement. If the tax advantages are not available, or you just don't want to continue holding it, you'll have to close it out, incurring taxable distributions and potentially early-withdrawal penalties.

 

[shawnab]

@tyler112 Lots of stuff here to read up on. Thanks!

I'm considering leaving the retirement accounts in the US. I guess I would roll over the 401k into my IRA. If I do so, will I have to file a US tax return every year or just when I'm old and withdraw something?

Also, is there a way to convert the IRA funds into my Roth IRA (Roth conversion ladder) even if I no longer live in the US? If so, since I won't have any more US income I should pay minimal taxes on the converted sum, no? Or where is the catch?

 

[tyler112]

@shawnab Your IRAs (of any sort) would not have US taxable income until you take distributions from them. If you won't have any other US-source taxable income (e.g., from other taxable accounts, US rental property, etc), you won't need to file 1040NR.

Conversion from trad to Roth is a taxable event for IRS. If at the time you do it you are tax resident elsewhere which taxes you on world income, that conversion may also be a taxable event for your country of residence. It may also count against your retirement contribution limit in that country. So it's usually best to do the conversion prior to becoming tax resident elsewhere.

 

[shawnab]

@tyler112

you won't need to file 1040NR.

Good to know I won't have to file US taxes every year then!

So it's usually best to do the conversion prior to becoming tax resident elsewhere.

Or make sure to be tax resident somewhere where world income is not taxed? I see an opportunity there. This would apply for Roth conversion and withdrawals from the IRA, right?

 

[whitesunshinee]

@shawnab There is some info on a website called Investments For Expats about rolling a 401k to an IRA. They also work with a US tax advisor from what I know.

Depending on you're citizenship depends on the tax treaties that are available. My brother lives in Thailand but is a UK resident so has favourable conditions by purchasing an Elite Visa. There are also similar options open in that part of the world.

 

[shawnab]

@whitesunshinee Helpful resource, thanks!

 

[whitesunshinee]

@shawnab No probs! Hope it helps!