Form 8621 explained

Form 8621 is the IRS form used to report PFIC holdings, calculate PFIC tax and make certain elections. It is detailed and easy to underestimate.

Who files it

Generally, a U.S. person for federal tax purposes who directly or indirectly holds PFIC stock. That includes U.S. citizens and resident aliens living abroad.

One form per PFIC

A separate Form 8621 is generally filed for each PFIC. Several foreign funds can mean several forms each year.

Annual reporting

Form 8621 can be required annually even in a year with no sale or distribution. Exceptions exist, including:

• a limited value-based exception for smaller holdings in some circumstances;
• certain treaty-related foreign pension exceptions.

These are reporting exceptions with conditions. They are not blanket tax exemptions, and they do not apply to every holding.

When it is due

Form 8621 is generally attached to your annual U.S. return and filed by its due date, including extensions. If you are not otherwise required to file a return, a separate filing can still be required.

What the form covers

What the form reports depends on how the PFIC is treated:

• Default rules: excess distributions and gains, and the related tax and interest.
• Mark-to-market: annual inclusions and allowable deductions.
• QEF: your share of the fund's ordinary earnings and net capital gain, using information the fund provides.

If you have missed it

Missing Form 8621 filings are common among Americans abroad who did not know about the rules. Missing information can also keep the assessment period open for a return. The right way to address prior years depends on your facts, so speak with a qualified U.S. international tax professional.