Dear Experts,

My sister and her colleagues worked for an American company in Bangkok for years, they've never been to US or even have US visa. Business closed down last year and they were all advised to withdraw 401K from Fidelity, which they did.

They applied for ITIN and submitted W-8BEN to Fidelity. Now they received 1099-R with 20% Federal withholding, code 1 on box 7.

Kindly advise how to report 1099-R on 1040NR. Thank you very much.

The distribution would go on line 17a and 17b of form 1040NR.
Early withdrawal penalty would go on line 56.
Taxes withheld on line 61
See the instructions:
http://www.irs.gov/pub/irs-pdf/i1040nr.pdf

TaxForAliens has it right.

They MAY have been able to roll the money into an IRA to delay paying taxes and penalties, but it is too late for that now. Sorry!

If they need my professional help, please email me at the email address in my profile.

Thank you very much..

Glad to help!

Section 861(a)(3) provides that compensation for labor or personal services performed in the United States is treated as income from sources within the United States and section 862(a)(3) provides that compensation for labor or personal services performed without the United States is treated as income from sources without the United States.


An employer’s contributions to a pension plan with respect to wages earned abroad by a taxpayer is compensation for labor or personal services performed without the United States and are treated as derived from sources without the United States. See Rev. Rul. 72-149.


However, the "earnings and accretions" (i.e. the earnings on the contributions into the plan) would be U.S. source income.


The foreign source income would not be subject to U.S. tax. Further, there would be no early withdrawal penalty on the foreign source portion because it would not be considered gross income to the nonresident aliens. The U.S. source portion would be subject to U.S. tax at a flat 30% rate, unless the Thailand-U.S. Income Tax Treaty reduces the tax. I have not reviewed the treaty.


These rules and the breakout between the U.S. source portion and the foreign source portion is discussed in Rev. Rul. 79-388.

Well done, IntlTax. I learned something today.

Thank you so much... I truly appreciate your kind assistance.