[majormajor]

Hello, I worked in the US, was a resident under L visa and contributed to a 401k, like any other US employee. I now work outside of the US under a US expat contract still for the same US company and I am on US payroll: I fill out a US tax return every year but I am not a US resident nor do I have a green card.
May I still contribute to the 401k as if I were a US citizen?
My company seems to think I cannot contribute any longer and even would like to break the 401k, which would trigger I think taxes and penalties... :mad:

[MukatA]

If you are nonresident and you are not present in the U.S. then your income is not taxable in the U.S. even when you are paid by the U.S. employer. Submit W-8BEN to the employer.

[AtlantaTaxExpert]

Agreed; you may want to amend those returns that you have filed to at least get back the federal income taxes you have paid.

[IntlTax]

I am not sure if you being a non-resident alien prevents you from contributing to a 401(k) plan but I wouldn't be surprised if it did.

Yes, if you take distributions out of the 401(k), you will be subject to U.S. income tax on the distributions and may owe a penalty for early withdrawl.

[AtlantaTaxExpert]

The issue is usually NOT what the tax law allows, but rather what the 401K custodian allows, and that seems to be the case here.

Be that as it may, rather than a forced distribution of the 401K assets (with the resultant taxes and penalties), the OP should investigate the option of rolling the 401K into an IRA, something which IS permitted if the OP can find a willing custodian.

I know from experience that Charles Schwab IS a willing custodian in such matters, as they cater to an international clientele.

[majormajor]

The issue is usually NOT what the tax law allows, but rather what the 401K custodian allows, and that seems to be the case here.

Be that as it may, rather than a forced distribution of the 401K assets (with the resultant taxes and penalties), the OP should investigate the option of rolling the 401K into an IRA, something which IS permitted if the OP can find a willing custodian.

I know from experience that Charles Schwab IS a willing custodian in such matters, as they cater to an international clientele.

Thanks for all the answers. If there is no law against non US citizen working abroad but on US payroll contributing to a 401k, why should the custodian bother? If nobody breaks any law, what could be the problem for the custodian?

[The Texas Tax Expert]

There's a lot more to this than you think.

One issue you need to consider is whether the foreign country in which you are resident will impose tax on the earnings of the account. Although these may be tax deferred for US purposes, the account may not qualify as being tax deferred for the purposes of the foreign country.