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    Trishala Raj's Avatar
    Trishala Raj Posts: 93, Reputation: 1
    Junior Member
     
    #1

    Feb 2, 2021, 08:19 PM
    Non Resident tax implications
    Hello Atlanta Tax Expert,

    If I left the USA in 2017 . I am now in India and so am a non-resident for US tax purposes for 2020, and want to convert part of my traditional IRA to Roth IRA. What are the tax implications of this conversion for me? Is there a tax slab for NR (Non-Resident) person?

    Would appreciate your response.

    Thanks in advance.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,818, Reputation: 846
    Senior Tax Expert
     
    #2

    Feb 2, 2021, 08:36 PM
    On such a conversion, you will have to pay taxes on the value of the IRA with NO deductions at all (since NRAs do NOT get the claim the standard deduction).

    Will you be returning to the United States any time soon to work?
    Trishala Raj's Avatar
    Trishala Raj Posts: 93, Reputation: 1
    Junior Member
     
    #3

    Feb 2, 2021, 08:47 PM
    No will not return anytime soon. What rate will I be taxed at? Will it be
    flat 30%?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,818, Reputation: 846
    Senior Tax Expert
     
    #4

    Feb 2, 2021, 08:58 PM
    No.

    Since the 401K or IRA distribution was tax-deferred when you filed your return and deducted the contributions off your tax returns way back when, the transfer will be taxed using progressive tax rates.
    Trishala Raj's Avatar
    Trishala Raj Posts: 93, Reputation: 1
    Junior Member
     
    #5

    Feb 3, 2021, 06:56 AM
    The contribution was tax deferred but we did not take any deduction on it . So at what rate we pay taxes then ? Is there a tax table to follow for Non residents?

    Thanks for your responses
    Trishala Raj's Avatar
    Trishala Raj Posts: 93, Reputation: 1
    Junior Member
     
    #6

    Feb 10, 2021, 08:03 PM
    Hello ATE,

    I was on F1 student visa from India in 2010. Later I was on H1b visa.
    Now I am a non resident and
    filing a dual status . When I file the 1040NR, can I use Article 21(2) to
    claim my kids as dependents? Or I cannot claim any dependents on my 1040NR
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,818, Reputation: 846
    Senior Tax Expert
     
    #7

    Feb 10, 2021, 08:15 PM
    The answer to your question is you CAN claim your children as dependents.

    The actual issue is WHY are you filing dual-status??

    Presumably, you have returned to India and are filing for the W-2 for the partial year of 2020.

    However, you have the option of claiming the default Residency Termination Date for 2020 as 31 December 2020, which would allow you to file as a resident alien one last time.

    You WOULD have to declare all world-wide income, but you can declare your Indian salary and claim the Foreign Tax Credit for Indian taxes paid.

    This will allow you to claim the $24,800 joint standard deduction, claim the full Child Tax Credit for your children if they have SSNs, and probably will allow you to get the Economic Stimulus payments added to your refund. The end result would be a MUCH higher refund.

    Do NOT forget to submit the Residency Termination Statement by 30 June 2021.

    If you need professional help with this, email me at [email protected].
    Trishala Raj's Avatar
    Trishala Raj Posts: 93, Reputation: 1
    Junior Member
     
    #8

    Feb 10, 2021, 08:43 PM
    Sorry I meant 1040 NR and not dual status. I have been out of USA since 2017 but withdraw small amounts of my ira income every year . So I do 1040 NR.
    In 2010
    I was on F1 student visa. Does that make me eligible to claim my kids as
    dependents on my return using Article 21(2)?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,818, Reputation: 846
    Senior Tax Expert
     
    #9

    Feb 10, 2021, 08:49 PM
    Then the answer is NO. To claim your children as dependents on the Form 1040NR, they must be physically present in the United States during the year of the tax return.
    Trishala Raj's Avatar
    Trishala Raj Posts: 93, Reputation: 1
    Junior Member
     
    #10

    Feb 11, 2021, 08:56 PM
    Thanks . Appreciate your response.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,818, Reputation: 846
    Senior Tax Expert
     
    #11

    Feb 11, 2021, 09:55 PM
    Glad to help!

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