HI ATE and IntlTax,

First I would like to thank you for this wonderful site.


I am also in the same situation. I came through other publications and it was mentioned that Capital Gains and Dividends are taxed at 30% whereas principal is just taxed at normal tax slab rates for that year.

For e.g. I had invested around $60000 both including Employee and Employer contribution and have lost around $10000 in the account during the recession so had only loss at the end. I rolled all the amt to Traditional IRA. Then converted $37000 to Roth IRA in Dec 2010 to get the 2 year tax spread advantage. I did withdraw $13000 from traditional IRA.

In the 1099 are nothing was mentioned related to Dividend and I am sure that I did not make any money instead I lost.

I will file taxes for 13000$ - year 2010 - Personal exemption 3700, 10000 for Primary home-
So Penalty will be for 3000 only which is 300
Taxable income = 13000 - 3700 = 9300
Tax is 10% for first 8500 - 850
Tax is 15% for 8501 - 9300 = 800*15/100 = 120
850 120 300 = 1270

I will file taxes for 18000$ - year 2011 - Personal Exemption - 3700 remaining taxes and penalty

So Penalty will be for 18000 which is 1800
Taxable income = 14300
Tax is 10% for first 8700 - 870
Tax is 15% for 8701 - 14300 = 5600*15/100 = 840
Total tax Penalty = 1800 870 840 = 3510

I will file taxes for 18000$ - year 2012 - Personal Exemption - 3700 remaining taxes and penalty
Total tax will be more or less same as the previous year.

Please let me know if I can take any itemized standard deduction or any other way to cut these taxes at least to some extent.


Regards
Viji

The above tax filing is 1040NR tax filing with single status.

Viji:

What is your home country?

Are you located in your home country or in the United States?

Hi ATE,

My home country is INDIA
I returned to INDIA on NOV 2009 and from that time I am in INDIA.

Thanks
Viji.S

You ARE calculating the tax liability correctly, because 401K distributions are taxed as deferred compensation. However, as a non-resident alien who is NOT a student or business apprentice, you are NOT permitted to take the standard deduction.

Thanks ATE.

The problem here is my TAX consultant had filed my return wrongly.

For Last year 2010 Jan - Dec
He took my income as 13202 (This is the actual amt withdrawn)
Never mentioned the penalty in the return
He took Personal exemption for myself, my daughter and for my son = 3 * 3700 = 11100
13202 - 11100 = 2102 This is the actual taxable amt.
Then tax is 10% of 2102 = 210
I know that we cannot claim my dependants, In spite of me asking he told we can claim, so I thought there might be some rule which I don't know. So what should I do now. I have posted the return through international mail and it has reached US on 17th Oct 2011. Already the return is late and I have already paid around 593 dollars as tax before April 15th 2011.

Will the IRS send me some notice or what Should I do to correct it.
Is there any option for the next 2 years to pay the tax in instalment as it is huge amount of 3500 each years. Could you please guide me.

Thanks Again for your expert advice.

I will send you separate mail to your ID for doing taxes for next 2 years. I would appreciate if there is any legal way that I could save tax.

Regards
Viji.S

You have two choices:

1) You can amend the return immediately and correct the known errors. Do that and the IRS will likely NOT charge you penalties for failing to pay the correct amount of tax, because you came forward voluntarily.

OR

2) You can wait for the IRS to review the return and discover the errors, then notify you. I suppose it is possible that the IRS will not notice the errors, but, given the egregious nature of these errors, I find that unlikely. Further, it will take until probably this time NEXT year before the IRS will notify you of the results of their review.

I can do the amendment for you; email me at [email protected].