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SydneyCLee · Jul 7, 2008, 06:15 PM

Hello,

I graduated from college on an F1 visa in may of 2006 and started working under my OPT allowance until December of 2006, when I switched to an E-3 status. In 2007 I filed as a resident alien. Was I eligible?

Secondly, am I allowed to contribute to an IRA? And if so, what are the tax implications when I leave the country? Are these different than for my 401(k) ?

Thank you very much in advance.

MukatA · Jul 7, 2008, 06:57 PM

Yes, for 2007 you will file resident tax return.
Yes, you can contribute to an IRA. Read more: about Trad IRA and Roth IRA Your U.S. Tax Return: Traditional IRA and Roth IRA

SydneyCLee · Jul 7, 2008, 07:02 PM

Thanks for the reply.

What do I do when I leave the country, before retirement, which is more likely to happen than not?

If I wait until my retirement age to withdraw, do I still have to pay taxes if I am living overseas?

Thank you very much again and the blog was helpful.

MukatA · Jul 8, 2008, 01:56 AM

Foreign persons should think twice before investing in a retirement plan in the U.S. How will you manage your retirement investment?
Withdrawal before 59 1/2 is subject to early withdrawal penalty. Also all withdrawals are taxable income.
In 401K, if you do not have any activity for a year, you may even pay some charges.

SydneyCLee · Jul 9, 2008, 07:55 AM

Thank you again. So my best bet is not invest in a 401(k)? If I withdraw my money at 59 1/2 while I am not in the US, are there any penalties?

AtlantaTaxExpert · Jul 9, 2008, 07:58 AM

There ARE penalties for withdrawing the money before age 59.5, but NOT after. It does not matter where you are located.

You MAY have to file a non-resident alien tax return (Form 1040NR-EZ), but that can be managed as well.

As for whether you should invest in the 401K or not, that depends on a variety of factors, such as when you vest in the pension AND whether your employer matches cintributions. The match, after all, is FREE MONEY.