Us Ira, 401(k) For Dual Thai/us Citizen?

[CaptHaddock]

My wife's citizenship test date comes up next month. I expect her to pass without a problem. We currently live in the States, but may retire to Thailand at some point in the future. She currently has an IRA account and will start a 401(k) account with her employer next year. If we do settle in Thailand, does she become liable for taxes on distributions from her US retirement accounts? Do the Thai tax laws tax Thai on worldwide income or just income received in Thailand?

[longball53098]

If she lives and works in the US I am pretty sure she is subject to all the US tax laws. If you move overseas you still owe tax on any income generated in the US.

Check the irs.gov wbesite

Living out of the US does not exempt anyone that is a US taxpayer from taxes and that includes IRA and 401k distributions.

The IRS has a whole area devoted to US taxpayers living abroad.

[Tagaa]

The simple answer is yes. Once she is a US citizen, she is liable to our Uncle Sam & Aunt Iris (IRS) for tax on income, dividends & interest, WHEREVER she may live. If she earns income in Thailand, she will get an exclusion for about $80,000 of income earned, but she will be liable for Thai tax. THERE IS NO EXCLUSION for interest & dividends (her regular IRA & 401K & bank deposit interest). These are fully taxable as regular income, no matter where she lives. The kicker is that it will be taxed the same as a self employed person, so she will pay the full boat on Social Security & FICA tax plus her regular federal income tax. If you still have a "residence" in the US, she will also owe state income tax. This tax burden could be as high as 50%, depending on the state tax. The only way to avoid tax is to convert the traditional IRA & 401K to a Roth IRA, pay the tax now & then get the future income tax free.

I am a US citizen. My question is WHY, OH WHY, does she want US citizenship? If I could get citizenship in Thailand, I would renounce mine ASAP. Uncle Sam & Aunt IRIS will follow her around the world, even after she dies, looking for their supposed share of whatever she may have or leave to an heir.

Please think twice before taking the oath. I feel that today, the detriments of US citizenship far outweigh the benefits.

That's our opinion, we welcome yours.

Edited June 18, 2008 by Tagaa

[lopburi3]

I believe he is asking about Thailand doing the tax. Normally Thailand will not tax unless it is income brought into the country in the year earned. So if you take a distribution it will be from previous years earnings.

[GaiYaang]

I am a US citizen. My question is WHY, OH WHY, does she want US citizenship? If I could get citizenship in Thailand, I would renounce mine ASAP. Uncle Sam & Aunt IRIS will follow her around the world, even after she dies, looking for their supposed share of whatever she may have or leave to an heir.

Please think twice before taking the oath. I feel that today, the detriments of US citizenship far outweigh the benefits.

That's our opinion, we welcome yours.

LOL , most Thai would think why would you not want a US Citizenship. May be just in case something happen you can alway come back to the USA. If you have green card and you can't stay too long outside the USA.

Most people think being a US Citizen has lot of benefits.

[PeaceBlondie]

Traditional IRA and 401(k) payouts are NOT subject to FICA or Self-Empolyment Tax. They are subject to federal income tax, with penalties for withdrawals before age 59.5.

Many contributions to IRA-401(k) plans were taxed on FICA or SE tax when the wages were earned.

[taxout]

Green card holders are taxed on their worldwide income just like US citizens, so naturalization should not affect your wife's Federal tax position.

http://www.irs.gov/businesses/small/intern...d=96493,00.html

This holds true even for green card holders actually living abroad.

http://www.irs.gov/pub/irs-pdf/p4588.pdf

The US-Thai Tax Treaty might help in the particular case or two if double taxation by both countries arises.

[CaptHaddock]

My question is not about US taxes. I understand US taxes. My question is about Thai taxes. It sounds like she would not be taxed by Thailand on IRA and 401k distributions. Thanks for the info.

There are many reasons for her to get US citizenship.

1. Most important: so that we could settle in Thailand while keeping the option open to return to the US. Otherwise, she would lose her green card a year after leaving. It took almost 3 years to get that green card.

2. When I croak she will inherit my IRA accounts. If she is not a US citizen, the IRS will treat the entire IRA as a distribution and tax it before she gets it. As a citizen she can inherit an IRA that becomes her own IRA which continues to grow tax-deferred until she takes either voluntary distributions or required minimum distributions.

3. If there were to be any legal difficulties with her inheritance as a citizen she would have access to the US courts.

4. Travel is infinitely easier with a US passport.

5. The world is a dangerous and uncertain place. Dual citizenship could be a hedge against all kinds of eventualities.

6. The financial markets in the US are much more developed and a better place to invest than those in Thailand.

Yes, it's too bad about having to pay US taxes, but that's the deal.

Edited June 18, 2008 by CaptHaddock