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Cashing on a large chunk of 410k before returning.

Cashing on a large chunk of 410k before returning.

Old Dec 13th 2023, 4:10 pm
  #16  
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Default Re: Cashing on a large chunk of 410k before returning.

Originally Posted by countrygirl33
Thanks for your response Durham Lad. I guess I'm thinking if I did the conversions from my IRA into a USA Roth first and pay the US approx 30% tax then when I transfer the money to the UK , it would be recorded on my UK tax as Roth money and no further tax due to the UK , or am I not understanding it correctly ? It is hard trying to find a UK accountant here in North of UK that understands USA tax .
There is lots of debate on this subject but once you are resident in the UK then for sure, periodic distributions from your IRA including Roth conversions are fully taxable by HMRC.

The big debate is the definition of a lump sum by HMRC and interpretation of the UK-US tax treaty. For sure I think that if you converted all of the IRA or 403b to a Roth in a single transaction then it would only be taxable in the USA. I also think that you can convert a single lump sum to a Roth and have it taxable only in the USA, then a couple of years later convert another lump sum etc.

What I did was to start making conversions immediately we both retired. After 7 years we returned to England and then alternated between mine and my wife’s IRAs making annual lump sum conversions. Within 5 years of returning we had completely converted all our IRA money to Roths. We declared the sums and why they were taxable only by the IRS on our HMRC returns.
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Old Dec 13th 2023, 7:30 pm
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Default Re: Cashing on a large chunk of 410k before returning.

Originally Posted by spouse of scouse
Your knowledge of this stuff is really admirable Durham Lad, as is your willingness to help others. Good on you!
Thank you.

I have learned so much from this and other forums, enabling us to retire at 55, tax minimization moves, understanding the tax code and tax treaties, that I feel an obligation to share that knowledge with others, plus I am still learning.
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Old Dec 13th 2023, 8:22 pm
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Default Re: Cashing on a large chunk of 410k before returning.

Thanks DL ..
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Old Dec 15th 2023, 10:00 am
  #19  
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Default Re: Cashing on a large chunk of 410k before returning.

This may not be applicable to the OP's situation, but just in case it is:

I left the US and returned to the UK, leaving behind a 403(b) (similar to 401(k)), held with TIAA-CREF. For reasons that are different to the OP's I looked into trying to roll my 403(b) into an IRA and convert to a Roth IRA. I hit an immovable hurdle because TIAA-CREF were insistent that I must have a US address, for reasons to do with the Patriot Act. After over a year of to and fro, I eventually gave up on that possibility as I was banging my head against a brick wall.

On a separate note, I ended up transferring most of the money in my 403(b) to the UK, living off that (paying UK income tax on it), while ploughing almost my whole UK salary into my UK occupational pension and a SIPP. During that time, I also hit an issue in that TIAA-CREF were automatically deducting US tax (I can't remember at what rate) from every withdrawal, and I had about a 2-year battle to eventually get that tax reimbursed to me - after which they again deducted tax on at least one other withdrawal.

So, a similar situation to the OP in some ways and not in others. For me, the take home message is to do lots of research into the possibilities and the regulations before you return to the UK, because after you return, it may either be too late to do what you planned, or you may end up in what feels like an interminable battle with intransigent employees of whoever your 401(k) is held with.
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Old Dec 15th 2023, 11:17 am
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Default Re: Cashing on a large chunk of 410k before returning.

Originally Posted by dunroving
So, a similar situation to the OP in some ways and not in others. For me, the take home message is to do lots of research into the possibilities and the regulations before you return to the UK, because after you return, it may either be too late to do what you planned, or you may end up in what feels like an interminable battle with intransigent employees of whoever your 401(k) is held with.
Exactly!!

When my son quit his job and moved from the USA then he left within 3 or 4 days of quitting his job. I flew 2 weeks before he left to help with final details and packing. The day after he quit he initiated the rollover of his 401k into an IRA and that took a week or two to complete, well after he was in England. I don't believe he would have been able to initiate the rollover if he was not resident in the USA.

The IRS does mandate that distributions from IRAs are subject to a mandatory tax withholding if the recipient lives overseas even from a Roth IRA which is tax free. (I know this from experience and conversations with Vanguard)
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