US/ UK tax on 401K withdrawal


R

ranga.desi

I have been searching online for a while and really hope
this group will help me find the answer. I was working in
the US at the beginning of this year (2006) on a work
permit( H1 B visa) . I lived there for exactly 182 days and
left the US on July 1st to move to the UK where I started
work on July 17th. I am on a spouse settlement visa in the
UK which made me eligible to work. I am planning to move all
my bank balances, 401K retirement money etc in the USA to UK
( I need the money!) . The 401K customer service rep told me
that I could fill in a form by which I would not be taxed
the 30% on early withdrawal or the 10% penalty by virtue of
me living in a foregin country ( foreign beneficiary).

Now, my questions is - does it mean I can get the 401K money
without paying tax at all ? Will I have to pay tax on this
transaction in the UK ? If so, am I better off being
taxed/penalized in the US instead of being taxed in the UK ?
Also, I am not certain if I am considered a UK resident and
hence, will be a non-resident alien by US tax terms , or if
I am still a US resident alien by virtue of the substantial
presence test ( which I believe is just 183 days counting
days in 2006 + 1/3rd from 2005 and 1/6th from 2004). I hope
I am not making wrong assumptions.

I will be so happy with a clarification to my questions .

Regards,
Ranga
 
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