My visa was J-1 student. I came to US at the end of 2000. In summer 2005, I did an internship and got 401k benefit. I rolled it over to the IRA account when I came back to school. After graduation 2006, I did academic training between 2006 and 2007 and left US almost at the end of the year. The company also offered 401k plan. I didn't opt out. I have some money in the account too.

Then, I left US without closing IRA, 401k, and my stock trading accounts. Now, I am back in the US again on Nov 2008 on a J-1 trainee. I probably stay here for about a year and will leave US for good. By the way, I am still paying tax in my country for year 2008.

I have the following questions:
1. Do I have to file any income tax this year (2008). This time, I don't get paid by this US company but from the company in my country. By the way, I filed 1040 for year 2006 and 2007.

2. I have US stocks in my account (not 401k). I sold it for loss just recently. If I need to file tax, is this will be useful for anything?

3. What can I do with my IRA and 401k? If I would like to take it out, is there any economical way to do that? (no penalty) Other suggestions would be nice.

Thank you for answering my question. I know it is quite long and complicated questions.

1) If you are being paid by a U.S. company or a U.S. subsidiary of your home country employer, then you must file a tax return and pay income taxes. Under continuous presence, you will file as a resident alien, filing Form 1040.

2) You can claim that loss (up to $3,000) against other income earned. Because you must file as a resident alien, you will report ALL world-wide income on your U.S. tax return and claim the Foreign Tax Credit (Form 1116) for income taxes paid to your home country.

3) There is NO economical way to close down the 401K or IRA. You will pay taxes AND the 10% Early Withdrawal Penalty if you close and withdraw money from either account. Hence, it would be best if you just roll the money from the 401K into the IRA and keep the IRA open. You can manage the account from your home country via phone and email, then withdraw the money once you hit 59.5 years of age. Assuming the tax laws have not changed, you can make periodic withdrawals that are low enough to be tax-free, though you WILL have to file a Form 1040NR each year you make a withdrawal.

Thank you very much for help answering my questions. My friend (in the same program) talked to HR of the company. HR guy said the support is coming the company and the government. It is much like a scholarship. The amount of the support money is listed in my DS2019 form. They are tax exempt. I have no idea. None of my friend are in the same situation. So, I don't really have any cue at all. The support I got is pretty much like what I got when I was in the university which I did not file tax on that. I won't have any W-2 and no monthly statement either.

Anyway, thanks again for answering. About the 401k, I will probably roll it over. I am just curious if I change this into Roth-IRA will it be better when I withdraw it in the future. I hope it would not be too difficult.

If you convert to Roth IRA, the conversion amount becomes taxable income in the year you do the conversion, but there is NO 10% Early Withdrawal Fee.

Now, you could do an annual incremental conversion for the amount equal to your personal exemption ($3,500 for 2008). That way, the annual conversion amount that is shown as income would be completely offset by your personal exemption, effectively making the transaction tax-free.

It may take a number of years, but, eventually, the traditional IRA would be converted to a Roth IRA, where it would then grow tax-free.
Then, five years after the last conversion, you could withdraw ALL of the money from the Roth IRA tax-free!

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Then, five years after the last conversion, you could withdraw ALL of the money from the Roth IRA tax-free!

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This only applies if you are at least 59 and a half years old.

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Originally Posted by whoyouknow

2. I have US stocks in my account (not 401k). I sold it for loss just recently. If I need to file tax, is this will be useful for anything?
Thank you for answering my question. I know it is quite long and complicated questions.

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You can not deduct any loss in 401(k) or Trad IRA as your investment in 401(k) was never taxed. For net capital loss from schedule D, you can deduct $3,000 loss against ordinary income. Remaining loss will carryover to next year.

IntlTax:

There are so many exceptions and allowances for early withdrawal from a Roth IRa after that initial five-year waiting period that, for all intents and purposes, most anyone can withdraw their Roth IRA money without fear of penalty.

I have had several clients do it no problem over the past several years.

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most anyone can withdraw their Roth IRA money without fear of penalty

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I disagree that just about anyone cane withdraw funds without a penalty.