The IRS requires US owners to register ownership of PFICs on IRS Form 8621. (Photo: Taxes for Experts)
Is it necessary to file IRS Form 8621 every year? The answer depends on whether you own a Passive Foreign Investment Company (PFIC) in the United States and meet the threshold requirements.
The IRS requires US owners to register ownership of PFICs (foreign mutual funds and holding companies) on IRS Form 8621.
While reporting on offshore accounts, assets, investments, and income is usually needed yearly, IRS Form 8621 is one of the most complex international information returns to complete.
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Failure to file this form may result in various IRS fines and penalties, which can be lessened through the agency’s tax amnesty programs, known as voluntary disclosure.
In 2012, the threshold requirements for PFIC reporting were altered, with all PFICs required to disclose each year regardless of dispersed revenue. The minimal threshold requirements differ depending on whether the individual is filing single, married filing separately, or married filing jointly.
By filing IRS Form 8621, you may stay one step ahead of the IRS and avoid hefty penalties.
IRS Form 8621 must be filed in any year in which the total number of PFICs exceeds $25,000 for persons filing single or married filing separately. For married couples filing jointly, the total PFIC ownership must exceed $50,000 for the form to be required.
However, there is a disagreement between the regulation and the guidelines regarding whether IRS Form 8621 is necessary when a taxpayer has no distributions and is below the threshold requirement.
It’s worth mentioning that IRS Form 8621 can be complicated, so it’s best to have a professional tax draft for you. If you own a PFIC in the United States and meet the threshold requirement, file Form 8621 annually to avoid IRS penalties.
