Hi,

I studied (on F-1) for 4 years and then worked in US (on H1-B) for another 5 years for 1 company. While with the company, they had created a Profit Sharing Plan for me. I left in 2006 for good and moved to India. In 2008, I withdrew (lump-sum distribution) and they deducted 20% as Fed Tax. I received a 1099-R and it shows the Gross Distribution and same amount as taxable amount in 2a of the 1099-R. 2b has Total Distribtion checked and 7 has Distribtion code=1 . Fed Tax is 20% (box 4) of Gross Distribtion.

While in the US, I had also purchased a house - and since have been making mortgage payments on it.

Since leaving, I have been filling out both the Federal (1040 NREZ) and State (CT-part year/non-resident) tax but since there was no income, it went blank.

However, I still have the house and the mortgage interest, which is substantial.

My questions are:
1) What forms do I now need to fill out? 1040 NR that has Schedule A in it?

2) Can I claim the mortgage interest as Itemized Deduction even though I have not lived in US for 3 years now but I do pay mortgage and real-estate taxes? If yes, the 1040NR Schedule A doesn't seem to have a line for this? If no, is there any other way to claim this deduction?

3) Do I need to pay additional early distribution tax of 10% as stated in line 54 of 1040NR instructions?

4) Do I need to continue to file CT-1040 NR/PY even though I don't live there permanently, but do own a house there on which I pay mortgage and real estate taxes?

I do not have any rental income from the place - and it is being used by friend/family who take care of it as well.

5) If I can't get an itemized deduction, can I at least get the standard deduction?

It seems I will end up owing a huge amount in taxes both to Fed and State government if I can't claim the Standard deduction or Claim mortgage interested deduction through Itemized deduction. What should I do?

Thanks very much for all the advise I can get.

Regards

1 & 2) You can complete Form 1040NR-EZ, because, as a non-resident alien, noether the mortgage interest nor the real estate taxes are deductible. Sorry!

3) Yes.

4) There is no requirement to file a Connecticut return for 2008.

5) No; you can only itemize, but you have NO itemized deductions.

If I were you, I would rent the property to at least offset the costs of the mortgage payments and real estate taxes.

Dear Sir (AtlantaTaxExpert),

Thank you so much for your response and advise. It has at least saved me the tax I thought I'd also need to be the CT State.

A quick follow-up question. You mentioned I can complete 1040NR-EZ instead of 1040NR, but I don't see a line item on the EZ form for declaring the Distribution.

Will it come under:
a) line 3 (Wages, salaries, tips, etc. Attach Form(s) W-2-see Page 4)
b) line 4 (taxable refunds, credits, or offsets of state and local income taxes (see pg5)
Or another line?

Many thanks again

Regards


1 & 2) You can complete Form 1040NR-EZ, because, as a non-resident alien, noether the mortgage interest nor the real estate taxes are deductible. Sorry!

3) Yes.

4) There is no requirement to file a Connecticut return for 2008.

5) No; you can only itemize, but you have NO itemized deductions.

If I were you, I would rent the property to at least offset the costs of the mortgage payments and real estate taxes.

Hi again - one more question.

To my question 3 - whether I need to be additional 10% tax on early distribution, you had answered yes. However, again my question is - where in 1040NR-EZ do I report and calculate this?

Many thanks again

Regards



1 & 2) You can complete Form 1040NR-EZ, because, as a non-resident alien, noether the mortgage interest nor the real estate taxes are deductible. Sorry!

3) Yes.

4) There is no requirement to file a Connecticut return for 2008.

5) No; you can only itemize, but you have NO itemized deductions.

If I were you, I would rent the property to at least offset the costs of the mortgage payments and real estate taxes.

My error: you will need to use Form 1040NR to report the distributions under Form 1099-R. Sorry!