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Old 02-28-2010, 01:39 PM
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Tax on US pension after leaving the US for a nonresident?

am a a former green card holder. I surrendered my green card when I was working in Japan at the US embassy in Tokyo. I have filed US taxes for the last 2 years as a nonresident (1040NR etc). Up until now my former employer has paid KPMG to file my taxes but that will not continue this year and so I need an accountant with knowledge of such filings. I am in receipt this year of a pension payment from my previous employer which consists of an annuity payment over many years. When this was put in place I was advised that it would be exempt of New York state tax because of Public Law 104-95. I am fairly comfortable that I will not have to file NY State taxes in that regard (i worked only in NY State while in the US). My questions and needs relate to Federal tax. Firstly, it seems at first glance that I do not have to pay tax in the US because of the 2001 Tax Treaty. It states in Article 17 Pensions, Social Security, Annuities, Alimony, and Child Support that 1. a) Pensions and other similar remuneration beneficially owned by a resident of a Contracting State shall be taxable only in that State. Since I am now resident in the UK I suppose that I can claim a refund from the IRS. This, however, does not seem to be the treatment that my employer has adopted. They have withheld tax at 38+% which seems very high. I suppose that regardless of any advice from you I will need to file with the IRS to (I hope) reclaim tax. I also have income from shares that I was awarded while in NYC that have now vested. I understand that I will have to pay federal and NY state tax on this because I was resident when I earned these shares. The advice I received from KPMG on all this some time ago (and I do not know if this would still hold) was that a calculation would have to be made based on the number of days between my initial employment date (in London several years before I moved to the US), the date I moved to the US and the date I left the US. I am unable to find anything about how this might work on the internet. In fact I can only see that I owe 30% unless the tax treaty holds in which case it would be zero. If I do have to pay tax can I avoid anything by reinvesting the payment into an IRA or similar in order to defer the benefit? I am British and I am now back in the UK. I have no plans of returning to the US in the near future.

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