Hi,
I am working in US for the last 4.4 years in H1B visa and soon leaving out of US.

It looks like the tax rate for IRA distribution is taxed at a Flat rate of 30% for Non Resident aliens regardless of whether I withdraw after 59.5 years of age or earlier. (The only difference is 10% penalty.)

Is that true or am I misunderstanding the 30% Flat tax rule ?

The below is what I read from the "U.S. Tax guide for aliens":
A nonresident alien?s income that is subject to you.S. Income tax must be divided into two catgories:

1. Income that is effectively connected with a trade or business in the United States, and

2. Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax).

I assume IRA distribution is not effectively connected with a trade or business.

Can someone clarify it please whether IRA distribution falls into 30% flat rate or tax bracket based on the Annual US gross income ?

Thanks in advance.

The WITHHOLDING rate is a flat 30%. This is done to ensure enough is withheld to cover any tax liability incurred.

What you actually PAY in income tax depends on your overall income earned while you were in the United States in 2011, and that will be determined when you file your 2011 tax return.

If you need professional help filing, email me at [email protected].