My silly finance question !

RRK · Post by **RRK** » Tue Jan 16, 2007 1:43 am

We have several new members start a post with these words,

"I am new to finance. And I have this silly question !!"

I saved time by typing them here. Now go ahead and ask your silly question. One of the member or admin will answer your question.

Some may say, "There is no stupid question but only a stupid answer !"
You may believe that but still may feel your question is really silly.

Yes, then you are in the right forum, right thread.

Click the quick reply icon and post your quick silly question quickly !:)

allaboutfinances · Post by **allaboutfinances** » Wed Jan 17, 2007 12:08 am

Hi Guys,

As part of answering the questions for AAP, I'm not sure how I determine the
following?

1) Current marginal (not average) federal tax rate, based on your filing status
2) Current marginal (not average) state tax rate, based on your filing status

My filing status is MFJ and I have 2 kids

Thanks
Guru
=======================================
In response to above.

Look at post # 3 and 4 in the following thread.

US TAX QUERIES FOR TAX YEAR 2006, FILING BY APRIL 16 2007

You have to compute your AGI. Check your return from last year and check your AGI (Adjusted Gross Income). It is this number that will determine what should be the rate of tax on additional dollar earned. The tax rate on the incremental dollar earned is called the marginal tax rate.

suba · Post by **suba** » Fri Jan 26, 2007 11:27 pm

Guys, please help me understand how 401k works.Sorry for being dumb.

I have around $50k in 401k. If I return to India say in June 2007, I can draw the 401 money in two steps, $25k in 2008 and $25k in 2009. As I'll be having no income in those years and as the income will be only $25k for each year (from the 401k) I need not pay the tax, but only the penalty of 10%. Is this correct?

If my assumption is not correct what is the best way to ensure that I get maximum out of $401k? I'm not an USC and don't intend to take it.

When I withdraw my 401k money will they just take off the 10% penalty and give the balance to me? Or will the deduct the tax too?

Thanks!

RRK · Post by **RRK** » Sat Jan 27, 2007 12:21 am

Suba,
I am not answering your actual question. But I can tell you this - it is not silly question. Just wait for some of the threads that are being moved from finance forum to here.
Check those threads, it needs some reading for you to understand the answer to your question.

pls bear with us.

Inspector · Post by **Inspector** » Fri Feb 02, 2007 3:22 am

Is employer contribution in 401K included or excluded in arriving at the 15500 yearly limit?
My wife's employer a in her 401K contributes two 3% lots, one they call profit sharing and is fully vested reight from the beginning, while another is probably the routine 401k contribution, that's on some vesting schedule. Would both these contributions be included in max 401k limit?

Thanks!

Inspector;4646Is employer contribution in 401K included or excluded in arriving at the 15500 yearly limit?
My wife's employer a in her 401K contributes two 3% lots, one they call profit sharing and is fully vested reight from the beginning, while another is probably the routine 401k contribution, that's on some vesting schedule. Would both these contributions be included in max 401k limit?

Thanks![/quote]

No. The employer contributions do not add to the max 401K limit. Employer contributions are above and beyond the yearly limit.

sftrade · Post by **sftrade** » Fri Feb 02, 2007 3:29 am

When you are not in the US, you will have to file taxes as a Non-Resident (1040-NR) for any income earned during the period. which is taxed @ 30%. So the total taxes would be 30+10 = 40%. Why would they let you lightly is the question. Ofcourse I think the standard deductions would apply

Desi · Post by **Desi** » Fri Feb 02, 2007 3:50 am

viveks;2444On same lines how do you calculate MAGI? Thinking of putting some money in Roth IRA but not sure how to calculate that. Some sites mention your AGI and contribution to 401(k) and other retirement accounts, is that correct?

TIA[/quote]

Read this page ---> http://www.fairmark.com/rothira/modagi.htm

Desi · Post by **Desi** » Fri Feb 02, 2007 4:00 am

suba;3407Guys, please help me understand how 401k works.Sorry for being dumb.

I have around $50k in 401k. If I return to India say in June 2007, I can draw the 401 money in two steps, $25k in 2008 and $25k in 2009. As I'll be having no income in those years and as the income will be only $25k for each year (from the 401k) I need not pay the tax, but only the penalty of 10%. Is this correct?

If my assumption is not correct what is the best way to ensure that I get maximum out of $401k? I'm not an USC and don't intend to take it.

When I withdraw my 401k money will they just take off the 10% penalty and give the balance to me? Or will the deduct the tax too?

Thanks![/quote]

It is not possible to answer your question meaningfully without more information. Information needed is the following:

Is 401K holder GC, USC, H1B, other????
R2I in June 2007, how much prior to this is he leaving his job?
I am assuming zero thought has been given to rollover IRA.
Do you know what your marginal tax bracket will be in 2007?
What state do you reside in?
Married? Kids? how many?
Do you know if you qualify for RNOR and whether one year or two?

Desi

-------------------------------

sftrade;4648When you are not in the US, you will have to file taxes as a Non-Resident (1040-NR) for any income earned during the period. which is taxed @ 30%. So the total taxes would be 30+10 = 40%. Why would they let you lightly is the question. Ofcourse I think the standard deductions would apply[/quote]

SFtrade, most of the above is not correct. When one has a GC or USC, they still have to file as a resident even if they are living outside of USA. GCs and USCs always file as residents, no matter where they live.

In addition, the NRAs do not get standard deductions.

suba · Post by **suba** » Sun Feb 04, 2007 12:42 am

Desi,

Thanks very much for your response.

Here are the answers to your questions:

Is 401K holder GC, USC, H1B, other????
GC

R2I in June 2007, how much prior to this is he leaving his job?
Will leave the job almost at the same time of R2ing

I am assuming zero thought has been given to rollover IRA.
Yes, I don't have much knowledge about rollover IRA.

Do you know what your marginal tax bracket will be in 2007?
My total income is 90k per annum. So if I leave in June, my income for 2007 should be around 45k.

What state do you reside in?
NC

Married? Kids? how many?
Married, spouse not working and 2 kids

Do you know if you qualify for RNOR and whether one year or two?
It'll be 7 years as NRI at the end of May 2007. Made just 4 trips to India in these 7 years and spent a total of 2 months there. So I think I'll qualify for RNOR status.

Please let me know if you have more questions. I'm eagerly waiting for your reply.

Desibabu19 · Post by **Desibabu19** » Sun Feb 04, 2007 1:10 am

Suba,

I need to look up the taxability rules of NC for a six month resident and more importantly their taxation if any on IRA / 401K proceeds. So I will post more tomorrow or later today if I get time (most probably tomorrow).