I am a Belgian citizen, living in France since 2008, aged 46. I used to live in USA as resident alien. I am now asking for my 401 K to be transferred as a lump sum of money.
Do I heed to pay for a 10 penalty tax on the top of the 20% tax due?
Or do I qualify for an exemption under te YSA-France Tax trteaty?
If I use this money to pay for my primary residence in France (I would not have to pay penalties in USA), does it change anything?
Finally, could you confirm that I will NOT pay any taxes in France on this amount (as I already would have paid taxes in USA)?

Thank you for your help in this matter.

I cannot comment on the tax status of this income in France; please consult with a French tax expert.

Yes, you ARE liable for the 10% Early Withdrawal Penalty if you get an early distribution from the 401K. Further, the exemption from that 10% penalty for buying a home does NOT apply to 401K withdrawals. That rule applies ONLY if you withdraw the money from an IRA.

Depending on the amount of money withdrawn, the 20% withholding may NOT be enough to cover the tax liability. That 20% withholding is only a down payment of the taxes owed, and frequently does NOT cover the full tax liability, which can be as high as 50% if state taxes are also due.

If you need professional help filing your return, email me at [email protected] or [email protected].