The American Retirement Account That Can Get You in Serious Trouble in France

So here is the calm version of a scary topic. A U.S. 401k is a foreign financial account from the point of view of French taxes, and French residents must declare foreign accounts every single year. If you do not, fixed fines stack quickly and they stack per account and per year. That is how normal people end up with a five-figure or six-figure bill for a plan they never touched. Remember: this is not about paying French income tax on your 401k distributions in most cases, it is about reporting obligations you cannot ignore.

Where was I. Right. I am going to explain what France expects, show how the fines compound into the headline number, and give you a tidy plan you can execute in a weekend. We live in Europe, we file like Europeans, and we keep the treaty in our pocket when it helps.

Quick Easy Tips

Assume all foreign financial accounts must be declared once you are a French tax resident.

Never rely on U.S.-based advice alone for French compliance.

Work with a cross-border tax professional before establishing residency.

Document everything early rather than trying to fix issues retroactively.

The uncomfortable truth is that many Americans accidentally break French law without ever moving a dollar. France requires strict disclosure of foreign accounts, and failure to report them can trigger penalties reaching €100,000, even when no tax evasion was intended.

Another controversial point is that France does not treat U.S. retirement accounts the way Americans expect. Certain accounts, including some 401(k) structures, may not receive the same tax-deferred recognition they enjoy in the United States. From a French perspective, they can look opaque, noncompliant, or improperly reported.

There is also widespread misunderstanding around tax treaties. While treaties exist to prevent double taxation, they do not override reporting obligations. Many Americans assume a treaty protects them automatically, when in reality it only applies if accounts are declared correctly and consistently.

Finally, penalties are not discretionary warnings. France enforces compliance mechanically. Once a violation is identified, fines are applied regardless of intent, financial literacy, or how long the account existed before residency. The controversy lies in this reality: good faith does not equal legal safety.

The French rule that trips up Americans

If you are a French tax resident, you must report every foreign bank account and foreign “placement” you hold, use, open, or close in the year. France does this on Form 3916 and 3916-bis alongside your annual income return. The fixed fine for skipping one account is €1,500 per year, and it rises to €10,000 if the account sits in a non-cooperative jurisdiction. Most U.S. custodians are not on that list, so the €1,500 figure is the one you live with. Watch for: the fine hits even if there is no tax due.

What counts as an “account” in practice: bank accounts, brokerage accounts, retirement plans with an identifiable account number, online money accounts, even certain crypto platforms. If you could send money in or out, or if a custodian holds assets for you, France wants it on 3916.

“But my 401k is tax deferred” is not the magic sentence

Yes, the U.S.–France tax treaty generally gives the United States taxing rights over private U.S. pensions, which includes 401k and IRA distributions. You still report the income in France for rate-setting and you still report the underlying account each year on the foreign-account annex. Remember: treaty relief does not cancel your French reporting duties.

A quiet note because it matters: French agents do not always agree on how to classify U.S. retirement wrappers. Most treat a 401k as a foreign financial account that belongs on 3916. Some see plan features that resemble an insurance-type placement and ask you to tick the “placement de même nature” box inside the same annex. Either way, you disclose.

Where the “€100,000 penalty” comes from

There is no single magical €100,000 button in the Code Général des Impôts for retirement plans. The number appears when people skip filings for years and the fines accumulate.

• Base fine: €1,500 per year per undeclared account.
• Missed five years, one 401k: €7,500.
• Add a linked brokerage window or an old IRA you forgot: now you are at €15,000 per year for two accounts across five years, which is €15,000 total in fines, not per year. That is how people underestimate the pain.

Now add a second layer: foreign trust reporting exists in France with a €20,000 fixed penalty per failure plus punitive surcharges when the object is a trust. Why mention it here? Because certain employee plans and grantor-style wrappers can interact with trust rules when they hold French-situs assets or when an auditor decides the structure walks and quacks like a trust. You do not want to find that out late. Key point: if a plan is ever treated as a trust by the FTA, the penalties jump to five figures per missed filing, per year. That is how a messy file drifts toward €100,000 when several years are regularized. Watch for: trustees have duties, but French residents who are settlors or beneficiaries can be held jointly liable.

Bottom line inside the math: a 401k that is never reported on 3916 can trigger €1,500 per year. If other U.S. accounts were also skipped, and if any trust-like structure is in the mix, a multi-year clean-up can land uncomfortably close to €100,000. The number is the sum of years and accounts, not a single hammer.

What you must file, in plain French

• Form 3916-3916 bis with your annual return
  Tick compte for bank or brokerage accounts and placement for contract-like holdings. Enter custodian, address, account number, opening date, and status. Remember: one annex per account.
• Form 2047 and 2042 for income
  You still declare U.S. pension income in France so the household rate is computed correctly, then apply treaty relief so France does not tax it again. Heads up: social charges treatment depends on your status and the income type.
• Trust reporting only if relevant
  If a U.S. arrangement is a trust under French rules, there are creation, modification, and annual filings with €20,000 penalties for failures. Most plain 401k plans do not behave like trusts for these filings, but complex legacy plans or family arrangements sometimes do. If you are not sure, ask a professional before an auditor decides for you.

A weekend plan that gets you compliant

You do not need a saga. You need to inventory, disclose, and stack PDFs the way French desks like them.

Saturday morning

1. Inventory every U.S. account you own or control: checking, savings, brokerage, 401k, IRA, HSA, brokerage windows inside retirement, PayPal, Wise, crypto platforms.
2. For each account, download a statement with name, address, and account number, plus the date opened if you can find it.
3. Create a single PDF called “3916-Annex-[TaxYear]-[Surname].pdf” with one page per account. Remember: clarity gets you waved through.

Saturday afternoon
4) Open your impots.gouv space, attach one 3916 annex per account to your online return. The site walks you through it.
5) On Form 2047, report U.S. pension income if you received distributions. The treaty typically gives the U.S. taxing right, but you still declare it for rate purposes.

Sunday
6) If you missed past years, prepare a spontaneous regularization letter listing years and accounts. Attach annexes for each missed year and ask to apply the standard fine schedule. Early, voluntary fixes get a better reception than audit discoveries. Watch for: some tax centers accept secure-message submissions through your account.

What to say at the tax office without a speech

Keep it polite and specific, in the language the desk expects.

• When filing late 3916s
  What to say: “Je procède à une régularisation spontanée pour les comptes financiers détenus aux États-Unis. Vous trouverez un 3916 par compte et par année.”
  You look like a person solving a problem, not hiding one.
• When asked about the 401k taxation
  What to say: “Le plan est un régime de retraite américain. Les distributions sont imposables aux États-Unis selon la convention, mais je les déclare en France à titre informatif.”
  The treaty point lands, the reporting continues.
• If someone mutters ‘trust’
  What to say: “Le plan est un compte de retraite qualifié sous droit américain et je fournis la documentation du gestionnaire. Si un traitement ‘trust’ s’applique, merci d’indiquer les formulaires et l’étendue exacte des obligations.”
  You invite specifics. That keeps the scope narrow.

The four mistakes that create most fines

1. Assuming FBAR equals France
   U.S. FBAR or FATCA forms have nothing to do with Form 3916. Remember: different countries, different annexes.
2. Forgetting closed accounts
   If you close a U.S. account during the year, you still report it for that year. France wants the opening, use, and closing dates.
3. Not counting the brokerage window
   Many 401k plans include a self-directed brokerage window with its own account number. That can be a second 3916.
4. Confusing treaty protection with invisibility
   Treaty relief on taxation does not remove the reporting requirement. Skipping 3916 is the classic way to buy a fine for zero tax.

A worked example so you see the math

Meet someone who moved to Lyon in 2021, became tax resident that year, and has:

• A 401k at Fidelity.
• A brokerage window attached to that 401k.
• An old IRA at Vanguard.
• A checking account at a U.S. bank used twice a year.

They never filed 3916 for 2021, 2022, or 2023. In spring 2025 they decide to fix it.

• Four accounts times €1,500 per year times three years equals €18,000 in base fines.
• If the tax office decides the brokerage window is not a distinct account, that may drop to €13,500. If they find a forgotten PayPal, it might rise to €19,500.
• If nothing looks like a trust, no €20,000 trust penalty appears. If the taxpayer had also failed required trust filings on a separate family trust, add €20,000 per missed year and the clock runs toward the headline very fast.

Remember: the €100,000 stories are usually multi-year, multi-account, sometimes with trust-level penalties layered on top.

How distributions are actually taxed, one paragraph you can save

Under the U.S.–France tax treaty, most private U.S. pensions and 401k distributions are taxable in the United States, not in France. You declare the income in France so your household rate is computed correctly, and France gives relief to avoid double tax. This is why you see Americans in France reporting 401k withdrawals on Form 2047, then mirroring to Form 2042, and applying the treaty line so no French income tax is charged on that item. Heads up: social charge exposure varies. When in doubt, ask a professional to tag the lines correctly.

If you already received a notice

Do not panic, do not argue philosophy, and do not ignore the deadline.

• Step 1
  Gather statements and opening dates for every U.S. account. Make the list clean.
• Step 2
  File all missing 3916s in one package with a short cover note marked régularisation spontanée. Attach PDFs neatly.
• Step 3
  If the proposed fine includes a misunderstanding, respond with one page of facts and one page of law. Quote the €1,500 per account per year rule and identify exactly how many reportable accounts you had. Remember: simple arithmetic plus clean exhibits lowers heat.
• Step 4
  If trust language appears and you truly have a trust, consider counsel. The €20,000 trust penalty regime has technical defenses and deadlines.

Quick checklist you can print

• List every U.S. account with number, custodian, address, open and close dates.
• One Form 3916 per account for the tax year.
• Form 2047 for U.S. pension income and Form 2042 mirror.
• Keep PDFs for five years.
• If an arrangement even smells like a trust, get advice before you file.
• Submit early, politely, and in French where possible.

Watch for: the French portal updates 3916-bis layouts periodically. The rule does not change, only the buttons.

Light FAQ, because you will ask anyway

Do I list balances on 3916
No balance is required for standard bank or brokerage accounts. You disclose existence, identifying details, and dates. The income return is where numbers live.

Do I owe French tax on a 401k rollover
Rollovers inside the U.S. system require careful treaty reading. Many are treated as non-taxable in the United States and still disclosed in France. Report on 2047 for rate, then neutralize per treaty if appropriate. Remember: report the account either way.

Is IFI a risk for my 401k
IFI is a real-estate wealth tax. Financial assets like 401k holdings are outside IFI, although trusts holding French real estate have separate levies if unreported. Different problem, same moral: disclose properly.

Do I need to report my spouse’s U.S. account
If you have power of signature or used the account, yes. If the account is entirely separate and you did not touch it, file your own list and keep documentation in case the desk asks.

What changed my mind

Update: I used to think 3916 was a minor annex you could tidy “later.” After watching a perfectly ordinary household pay five figures over three omitted years for three sleepy U.S. accounts, now I tell people to treat 3916 like a seat belt. It feels silly until you need it.

Open a new note and write three lines: “List every U.S. account. File one 3916 per account. Declare 401k income for rate, then apply the treaty.” That is the French way to keep a U.S. retirement plan legal. If this already feels heavy, say the word and I will compress everything into a one-page filing worksheet with the exact boxes to tick and the French phrases you can paste into a cover note.

For many Americans, discovering that a perfectly legal retirement account at home can create serious legal trouble abroad feels unreal. Yet in France, financial compliance is not optional, and ignorance offers no protection. The shock isn’t that penalties exist it’s that so many people never realize the risk until it’s too late.

What makes this issue especially dangerous is its invisibility. A 401(k) feels passive and harmless, something you earned long before moving. But once you become a French tax resident, the rules change completely, regardless of where the account is held.

The problem isn’t hostility toward Americans. It’s structural mismatch. The U.S. retirement system was never designed to integrate cleanly with French tax law, and France does not bend its reporting framework to accommodate foreign complexity.

The most important takeaway is this: moving countries changes how your money is treated. Anyone planning life in France must treat financial planning as seriously as visas or housing, because the consequences of getting it wrong are far more severe.