Cashing in US 401K early while resident in Canada.

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 Date:           Wednesday November 19, 2003
 Time:           08:22 AM -0800
 QUESTION:
 I returned home to Canada in the spring after working for several years in
the states.  I did not begin working in Canada until the fall.  I cashed out
my 401K in the fall (needed the money) - what are the tax implications both
US and CDN.  The US company withheld 30% tax.  I need to file a US income
tax in the spring, and I will also need to file my Canadian one as
well.Thanks...MXXXX
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david ingram replies:
You will owe tax to the US plus a 10% penalty (unless you are over 59 1/2) for early withdrawal.
You will also have to add it to your Canadian Income and it will be taxed here.  However, the tax paid to the US can be used as a foreign tax credit and you will not pay double taxation although the net result is that you will pay whatever the higher rate is.
The 30% withheld will likely be enough to cover the US tax within a few dollara and if your total US income is under $30,000, will get you a small refund although you will likely still owe tax to Canada.
I would be glad look after these returns for you if you need help.  I do not know where you live but we fo several hundred returns by fax, email or mail and have never met the client.  Any questions can be dealt woith by a speaker phone consultation in the evening.
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 
New email to [email protected]
www.centa.com www.david-ingram.com
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
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This from "ask an income tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc.
  Alaska,  Alabama,  Arkansas,  Arizona,  California,  Colorado, Connecticut,  Deleware, District of Columbia,  Florida,  Georgia,  Hawaii,  Idaho,  Illinois,  Indiana,  Iowa,  Kansas,  Kentucky,  Louisiana,  Maine,  Maryland,  Massachusetts, Michigan, Minnesota,  Mississippi,  Missouri,i Montana,  Nebraska,  Nevada, New Hamshire,  New Jersey, New Mexico,New York, North Carolina,  North Dakota,  Ohio,  Oklahoma,  Oregon. Pennsylvania,  Rhode Island,  South Carolina,  South Dakota, Tennessee,  Texas,  Utah, Vermont,  Virgina, West Virginai, Wisconsin, Wyoming, Your name has been added to our email list because of an enquiry we have received,  we may not answer your question but 
another similar question will be as we lump them.
You may find more answers at www.centa.com
David Ingram of the CEN-TA REALTY  Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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