on any withdrawels? How about UK taxes. This is a regular contributary IRA. She is relatively young and any withdrawells ould be below the level of having to pay US taxes. She has no other US income. She works in UK and pays regular taxes. are distributions from the IRA a taxable event in UK?
2007-10-22 20:44:58 · 9 answers · asked by peter n 3 in Business & Finance ➔ Taxes ➔ United States
A US citizen is taxed on worldwide income. If she receives an inherited IRA the distribution to her is taxable to her regardless of her location.
She may treat an inherited as her own IRA and use it for her own retirement. This is a new rule, it may benefit you and your daughter.
2007-10-23 01:42:07 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
As a US citizen, she is subject to US taxation world-wide. The withdrawals would be added to her other income and taxed accordingly. This is unearned income and would not be eligible for the Foreign Earned Income Exclusion although any foreign taxes levied would be eligible for a credit against her US tax liability.
You say that she is "relatively young and any withdrawells ould be below the level of having to pay US taxes" but I'm having trouble understanding what you mean by that. Assuming that she is working in the UK -- or does at some point in the future -- she'd have to be earning very little income for the withdrawals to not be subject to US taxes. She is subject to the same filing requirements as anyone living here in the US so if she's no longer a dependent and has over $8,750 in income she'll be required to file and pay US taxes on her world-wide income.
Whether or not this is subject to UK tax is a question for a UK tax expert. The UK has their own rules on inheritances and gifts and they're not the same as US laws by any means. Whether the distributions are taxed in the UK won't affect her ultimate US tax liability.
2007-10-23 05:59:46 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
1. If it were a U.S. IRA, then it will be included in her income as ordinary income and will be taxable. However, no gift or inheritance tax is payable.
2. This is U.K. IRA. So it will be taxed in U.K. as per U.K. rule.
Now it may be treated in one of the two ways:
I. The money after deducting the U.K. tax is what she inherits. So there should be no tax.
II. She inherits the IRA and adds the amount in her taxable income. And then for the U.K. taxes she claims Foreign tax credit by filing form 1116 along with her tax return. So she will pay no tax or very little tax in the U.S.
2007-10-23 04:33:28 · answer #3 · answered by MukatA 6 · 0⤊ 0⤋
I'm no expert in this area, however, I am pretty sure that if the money is wired directly to her bank (in the UK) from the US based IRA, it is not taxable, as it is essentially the same as mailing a cashier's check to someone overseas.
That is of course, unless, it first goes through a bank in the US and draws interest.
Since I know little about an IRA, theoretically, if an IRA does in fact get interest, that interest is counted as income and therefore is taxable as USA income. Since it is most likely a national bank, and she does not reside in your state, I will assume that there will be no state taxes involved.
2007-10-23 03:51:33 · answer #4 · answered by centexdance 3 · 0⤊ 3⤋
yes she would if the IRA is in the us if shes a us citizen and works in another country she has to pay us taxes
2007-10-23 03:52:29 · answer #5 · answered by sexgod669 2 · 0⤊ 0⤋
so did you say shes only declaring money made in the USA on her taxes
2007-10-23 03:54:53 · answer #6 · answered by bstuck2000 3 · 0⤊ 0⤋
i think u have to ask the tax officials mayb they cld give u a better answer to tt question...
gd luck!!
2007-10-23 03:50:07 · answer #7 · answered by SexyPrincess 3 · 0⤊ 1⤋
My guess is that she will need to pay u.s. taxes.
2007-10-23 03:48:41 · answer #8 · answered by TN 3 · 0⤊ 0⤋
SHE HAS TO.IT'S THE LAW.
2007-10-23 03:54:48 · answer #9 · answered by wale 2 · 0⤊ 0⤋