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Tax rate on IRA for India Non-resident
What is the tax rate for a conventional IRA for an India non-resident alien.
Does an IRA fall under the pension tax rate of Zero for the India non-resident alien. I would also appreciate a IRS Code or some reference. Thank you for your reply Jack D. Hansen CPA |
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I cannot provide a citation, but my past experience with this issue is that I file the return as a non-resident return (Form 1040NR), claim the personal exemption with no standard deduction, and have the IRA distribution taxed as normal rates. I have successfully filed several total distributions this way, with the client willing to pay the 10% Early Withdrawal Penalty in order to have immediate access to his funds.
The IRA does NOT qualify for the zero tax rate, because the tax deduction was taken when the Indian worker was in the United States and got the IRA write-off; the IRS considers it to be tax-deferred compensation. I have confirmed this in conversations with IRS representatives on the IRS International Tax Hotline (267-941-1000). Feel free to confirm this by calling them yourself; at this time of year, there will be little or no wait. |
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