Tax implication of retirement fund liquidate after LPR

[mmju1 0]

Hi all,

 

I have a retirement account that can only be liquidated after 65 years old.  It is a fund base account under the monthly contribution of my working period and it inflated/gains after years.  I plan to land the US in next year and my retirement account will stay in my homeland for some years.  I wonder what is the tax implications on the year that I redeem or liquidate the retirement fund, which will be at my age of 65.  Will it treat as income for that tax year or it will treat as my asset for filing under the capital gain category?  BTW, for filing capital gain tax, will the gain over the years be calculated starting from my landing date? Or,  the capital gain tax will count since my first contribution to the retirement account, which was many years ago?  Thanks in advance for any insight into this issue.

[JeanneAdil 6,305]

was the money imputed into retirement account taxed in homeland or will be taxed there when liquidated?

this will be a case for a good tax accountant or CPA

 

Form 2555 will be used for monies earned outside the US (according to the tax table for any given year)

but to sort all of this out,  a good CPA will guide thru the tax returns for the year also (As they do change)

[mmju1 0]

Just now, JeanneAdil said:

was the money imputed into retirement account taxed in homeland or will be taxed there when liquidated?

this will be a case for a good tax accountant or CPA

 

Form 2555 will be used for monies earned outside the US (according to the tax table for any given year)

but to sort all of this out,  a good CPA will guide thru the tax returns for the year also (As they do change)

Thanks for your prompt reply.  At my homeland, this retirement fund account is non-taxable, I do not need to pay any tax at redemption.  Likely, the amount i got at age 65 will be tax.  Then, the second question, will it tax under income for that year or capital gain?

[JeanneAdil 6,305]

6 hours ago, mmju1 said:

Thanks for your prompt reply.  At my homeland, this retirement fund account is non-taxable, I do not need to pay any tax at redemption.  Likely, the amount i got at age 65 will be tax.  Then, the second question, will it tax under income for that year or capital gain?

out of my range of knowledge 

others may know

but u should consult a tax attorney or have a CPA do taxes the year u collect 

plus it will matter how it is paid out

1.  monthly payments

2   quarterly payments

3.  lump sum payment

without knowing all this at this time  (and the IRS rules for the year u will be collecting-they can change drastically),  it is not really a VJ question 

 

i do personal taxes but without knowing the country and again,  the IRS rules that will be force for the year u start payment(s) i suggest consult a certified tax attorney

[Wuozopo 4,290]

19 hours ago, JeanneAdil said:

 

Form 2555 will be used for monies earned outside the US (according to the tax table for any given year)

@mmju1

The above suggestion doesn’t work for your situation. You will NOT use the Foreign Earned Income Exclusion (Form 2555).

[carmel34 3,538]

This is not typically a DIY case, as it gets complicated depending on your home country.  Once an LPR in the US, you will be expected to pay US taxes as a resident, based on your worldwide income.  An experienced CPA, who is familiar with similar situations, would be worth paying for to make sure you follow the path of the lowest taxes due.  If your home country is China, here is the relevant US-China tax treaty for your reading pleasure:

 

https://www.irs.gov/pub/irs-trty/china.pdf

Edited August 15, 2022 by carmel34

[Wuozopo 4,290]

21 hours ago, mmju1 said:

Hi all,

 

I have a retirement account that can only be liquidated after 65 years old.  It is a fund base account under the monthly contribution of my working period and it inflated/gains after years.  I plan to land the US in next year and my retirement account will stay in my homeland for some years.  I wonder what is the tax implications on the year that I redeem or liquidate the retirement fund, which will be at my age of 65.  Will it treat as income for that tax year or it will treat as my asset for filing under the capital gain category?  BTW, for filing capital gain tax, will the gain over the years be calculated starting from my landing date? Or,  the capital gain tax will count since my first contribution to the retirement account, which was many years ago?  Thanks in advance for any insight into this issue.

I believe you will need professional assistance in characterizing the nature of your account to know your tax implications, at least for the first year then you can take it from there once you know which rules you are following. Also you will want to know if you can rollover the entire sum into a US account and any benefits from that. 
 

There are so many rules for taxation of pension, IRAs, Roth IRAs, SEPs, government paid pensions similar to Social security, etc. For example a traditional IRA defers tax on the contribution so the yearly distribution is taxable as income. A Roth IRA does not give any tax deferral on contributions, so Roth distributions are not taxable. Nor do they have required age distribution or required minimal distribution. In our case, our Edward Jones advisor is quite knowledgeable on on these matters because he also has degrees in Finance and 20+ years in the banking industry. But beware, not all advisors have this strong background.to help you sort it out. One can become a financial advisor with very little educational background or experience. A good advisor might could help you in a consultation to classify the nature of your account.  Or a tax accountant who has great international experience could help you know how you account is classified for US tax purposes. And if your country has a tax treaty, there will be a clause concerning pensions, retirements, etc stating any special treatments. However most treaties state the tax rules of the country of residence apply, but there are exceptions so the treaty must be reviewed. 

[mmju1 0]

Thanks for all the response above.

 

 If the retirement fund is treated as ASSET, which I will file for "capital gain" in the first year after landing. How to calculate the amount of gain at the moment I liquidate, a lump sum at age 65?  Under monthly contributions in the pre-immigration period, will the amount of GAIN based on the difference between contributions and final liquidation?  OR, the amount of GAIN based on the value of mutual fund on the date of immigration (landing)?