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Old 10-18-2016, 04:24 AM
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Encashing 401k money

I was working in US and my 401k was dealt by Fidelity. Currently I am settled in India and wanted to enchash the 401k amount. As per my understanding 30% of tax would be deducted from 401k amount normally in this case. But since India-US has treaty signed, submitting w2ben form the taxation would be 20%. Fidelity submitted my w2ben form to IRS and it got rejected becuase there were some address mismatch and i was not informed of it. When i recevied the cheque from Fidelity of the 401k amount, it was after 30% tax cut and i was expecting 20%. When I went back to them, they washed their hands off and said I need to get the remaining 10% from IRS and they cannot do anything. I would like to get some perspective regarding this situation. I have not encashed the cheque yet. I expected Fidelity to go back and sort this out, but they cared less. How do i go about getting my remaining 10%? Being in India how do I get the money from IRS?
Thanks in advance for any suggestions.



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Old 10-18-2016, 09:46 AM
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I was working in US and my 401k was dealt by Fidelity. Currently I am settled in India and wanted to enchash the 401k amount. As per my understanding 30% of tax would be deducted from 401k amount normally in this case. But since India-US has treaty signed, submitting w2ben form the taxation would be 20%. ===>I guess you are correct; Form W-8 is filled out by foreign entities (citizens and corporations) in order to claim exempt status from certain tax withholdings The benefit is that these individuals receive a certain tax treaty status that affords them certain right, such as lower withholdings from dividends paid by US corporations.

Fidelity submitted my w2ben form to IRS and it got rejected becuase there were some address mismatch and i was not informed of it. => address mismatch on W8BEN is no big deal. Actually withholding agent in US does not submit W8BEN to the IRS; Both a foreign person receiving payment and a withholding agent making the payment are personally responsible for the tax on U.S. sourced, income paid to the foreign person. If the withholding agent fails to withhold, and the foreign person does not satisfy its tax obligation, the IRS will approach the U.S. withholding agent for any related tax liability, including any interest and penalties to which the liability is subject and other penalties for reporting failures.

When i recevied the cheque from Fidelity of the 401k amount, it was after 30% tax cut and i was expecting 20%. When I went back to them, they washed their hands off and said I need to get the remaining 10% from IRS and they cannot do anything. I would like to get some perspective regarding this situation. I have not encashed the cheque yet. I expected Fidelity to go back and sort this out, but they cared less.=====>This is usual situation; W/H agent hardly takes responsibility on what they did wrong.


How do i go about getting my remaining 10%? Being in India how do I get the money from IRS?===>> Under the reimbursement procedure, the w/h agent must repay you, payee, the amount overwithheld. The W/h agent may need to their own funds for this repayment. The w/h agent must make the repayment by March 15 of the year after the calendar year in which the amount was overwithheld. For example, if they overwithheld tax in 2015, you must repay the beneficial owner by March 15, 2016; if not, to reclaim withholding tax on your retirement benefits, you need to file US tax return for refund.



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