taxes for a foreigner
If I make an IRA contribution and later become a nonresident
of the United States, how is my IRA taxed? I might move back to Argentina when
I retire and I only have a green card now and may never become a citizen.
If you move back to Argentina and eventually give up or lose your
"green card" status you are considered a nonresident for
income tax purposes. Pension income and the investment earnings
thereon, attributable to services rendered in the United States,
are treated as income from U.S. sources.
U.S. source income of nonresident aliens is taxed either on a gross basis or net
basis. Gross basis means that the appropriate tax is withheld at the source
and if so, no tax return is due. The most common example is the 30 percent
withholding applicable to dividends received by a foreigner.
Net basis taxation means that the foreigner has to
file a U.S. income tax return to report his or her U.S. effectively
connected income. Pension or IRA distributions, whether lump sum
(an entire distribution of the account) or periodic, are considered
effectively connected income.
The IRA custodian will withhold a tax at graduated
tax rates similar to those that apply to U.S. residents and citizens.
You'll need to file an annual tax return to determine if additional
tax is due or if you are entitled to a refund.
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