Going back to the UK

Old Jun 20th 2020, 10:44 am
  #31  
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Default Re: Going back to the UK

Originally Posted by djsoul View Post
Thats double taxation though - if you have your W8-BEN on file with your US broker and you are UK domiciled again, wouldn't you just pay tax to the HMRC and not to the IRS at all under the DT treaty? Still trying define whether you have to pay the 10% penalty to the HMRC if you're still under 59 1/2 in this scenario as I can't find clarification anywhere.
I'm a USC living in the UK so W8-BEN does not apply, and my brokerage does not do any mandatory withholding and I choose not to have any withholding each time I make a withdrawal from my IRA. I pay tax to both HMRC and IRS on worldwide income which includes IRA withdrawals but I take a foreign tax credit against my US taxes so pay zero taxes to the IRS. Because I don't have any withholdings on the IRA withdrawals the IRS is not holding my money. When I submit my IRS tax return the tax is calculated as if all the income was taxable in the US then the foreign tax credits are applied.

I don't know how it all works for foreign persons making IRS withdrawals but I would expect the IRS to want its 10% penalty for early withdrawals given that was the agreement when the tax deferred contributions were made.
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