# Renouncing soon...what to do with US IRAs?



## hanksteelbottom (Mar 13, 2014)

Hi everybody, 
Well I finally got Norwegian citizenship and will be renouncing the US one as soon as I get my passport. Before I moved to Norway I started a couple IRA's in the States while I was in college. As part of the "exit tax" of renouncing, am I required to cash out these IRA's (and pay the penalties)? If so, then I'll just go ahead and cash them out and be done with it...we're not talking massive amounts of money (maybe $20K), but still, if I have to do it, I might as well do it now. 

Thanks for any info/links that you can provide me.


----------



## Verdande (Apr 30, 2013)

Gratulerer! I believe you have to have some confirmation (written statement, video recording etc. ) where you affirm that you are taking another citizenship with the specific intent to relinquish the US. Otherwise you may end up having to renounce. Hopefully you already know all about this. The tax form you have to look at is 8854. The instructions mention a personal deduction before being liable for any exit tax. The amount is over the worth of the IRAs you mention. I do not know if you have to cash them out, but if you want to make a clean break and a fresh start, it might be advisable. Remember to make copies of all documents you sent to any US offices and it is worth the extra postage to send them registered with the possibility to trace and trace. You will probably/hopefully never get any confirmation or contact from the US authorities, so a record of having sent documents and a printout of the trace and trace showing delivery to the US offices is the only documentation you will ever have...


----------



## Bevdeforges (Nov 16, 2007)

You don't have to cash out the IRAs - and you may actually want to consider letting them sit and accumulate between now and whenever you decide to retire (or at least until you hit age 59 1/2 and can take out the money penalty free).

The one catch (and yes, there always seems to be one) is that you will be hit for 30% withheld as tax when you do withdraw your money as a foreigner. I used to think that you could then "just" file an NR return to get back the excess, but on last review of the IRS website, it seems that the tax is 30% period for non-citizens withdrawing funds from outside the US. (But the good news is that you don't have to bother filing the NR return!)

If you cash out the IRAs now, you'll have to pay taxes on the amounts you withdraw (at regular tax rates) plus a 10% penalty for "early withdrawal." You'll have to do the math to decide which way works out better for you.
Cheers,
Bev


----------



## hanksteelbottom (Mar 13, 2014)

Thanks again everybody; I'm always impressed at the quick responses on these forums!

@Verdande: Tusen takk!


----------



## BBCWatcher (Dec 28, 2012)

Plus tax in Norway may be owed if Norway's rate is higher (could well be) and if the tax treaty doesn't say otherwise.

It's not very likely to make sense to touch them.


----------

