I am an Austrian National who lived in Columbia, SC 1999 - 2002 and moved to Mexico in before the end of 2002. In 2003 I made an early withdrawal of my entire 401k savings of $US 23'000. Now I receive a letter from the IRS that I need to file a tax return using form 1040NR.

Question one: Is this correct, or should such income be taxed in Mexico?
Would I also need to pay state taxes in South Carolina? If so, what form is to be used?
On the form there is no provision for 401k. Do I treat it as an IRA?

Thanks

PHYTOSAN

PHYTOSAN:

No, use Line 17a and 17b for Pensions and Annuities.

Yes, you will have to file a SC tax return. You can find the form on the SC government website.

Thank you very much despite a somewhat expensive answer :) I have a couple of more questions that I'd much appreciate your insight on:

1. Can I deduct moving expenses from the U.S. to Mexico if work related and occurred in that year? Wat other deductions should I consider?

2. Form 1040NR makes references to pages that are not included in the form. For example item 6 in Filing Status and Exemptesion states Qualifying widower with dependent child (see page 7) My form goes to page 5. Where could I find the remaining pages?

Thanks again I much appreciate your time. Do you have any questions that I might consider answering?

PHYTOSAN

1) Yes, you can deduct the moving expenses. As for other deductions, I would have to see ALL your tax documents and speak with you to get the total tax picture before I could answer definitively.

2) Look at the instructions for Form 1040NR; they can be downloaded from Internal Revenue Service (http://www.irs.gov).

Again, very helpful, thank you very much. Just one more questions:

I am assuming that I should report moving expenses in line 9 - Unreimbursed employee expenses - job travel. Please confirm. I am also assuming that should fill out form 2106 based on criteria "1. You claim any travel, transportation meal or entertainment expenses for your job" Is this correct?

Again, thank you very much.

PHYTOSAN

Yes, you can claim the travel, transportation meal or entertainment expenses expenses, but if you got reimbursed, you have to claim the reimbursements as well to offset some of the expenses.

File For 3903 to claim the moving expenses.