401K

Among all the things that I am closing, I thought 401K will be taking most of the time, but it may not be the case.

I am not able to close it yet, because I am still employed, but these are the following steps.

1) Add a bank account link to your 401K. This takes 2-3 weeks, so just plan it in advance.
2) Once you quit your job (and after the company updates its status) the funds will be available for withdrawal. You can withdraw online, no need to call.
3) Since you have a bank account linked, you can transfer the money to bank account directly, no need to worry about cheque.
4) You will be getting the money after tax deductions. No 10% cut will happen when you withdraw.
5) When you file the taxes, the 10% cut will be added. I am assuming, I will be getting a 1099 form for this in 2009 (I have to give a postal address to receive it though)
6) Use Form 5329 (PDF), Additional Taxes on Other Qualified Plans (including IRA's), and Other Tax-Favored Accounts, to report the penalty. [From : http://www.irs.gov/faqs/faq-kw7.html]
7) How much you will get? This link describes a lot http://www.r2iclub.com/rrk/gen/r2i_401k_plan.htm

• Ex: If this NRA withdraws $5K in USA, he will pay penalty of 10% ($500), get exemption of $3K and will pay 10% tax on for $2K as $200. So, in total pay out is $700 in USA. If this is done during RNOR period in India, he will not pay any tax to GoI.
• Recommends complete withdrawal in 2 years of RNOR period, and pay no tax to GoI. It is really unfortunate that the RNOR period has been reduced from 9 years to 2 years