i am a Turkish citizen working in the USA with H1. I am permanently leaving the country in 20 days. I also have a 401k account. I am told that if i withdraw money now, I will have to pay %20 tax +%10 penalty. If I leave the money in that account, and withdraw it a few years later from Turkey with the form w8-ben, can I avoid paying tax + penalty?

i am a Turkish citizen working in the USA with H1. I am permanently leaving the country in 20 days. I also have a 401k account. I am told that if i withdraw money now, I will have to pay %20 tax +%10 penalty. If I leave the money in that account, and withdraw it a few years later from Turkey with the form w8-ben, can I avoid paying tax + penalty?

No.....because taxes will be due in any case.....(they were dax deffered..not tax exempt) and the only way to avoid penalties is to roll them into an IRS accepted plan something I highly doubt exists outside the USA....or start withdrawing them after you are old enough.

Charles Schw will let you roll the 401 k into a rollover IRA. TYiu then wait until age 60 to start drawing on it to avoid the 10% Early Withdrawal Penalty.

Simple!