This solution includes a sophisticated pfic module to streamline this process. If information required to be provided by a shareholder on irs form 5471 for a pfic is furnished by another person having an equal or greater stock interest in the pfic, the final regulations. Shareholders file form 8621 if they receive certain pfic directindirect distributions. Small pfic shareholders who are unable to obtain annual pfic information statements should be permitted to make qef elections on the basis of certain financial information reasonably available to. To elect to have your pfic taxed with the marktomarket accounting method, you will need to elect this method with your pfic account manager and file form 8621, information return for passive foreign. Altogether pfic guidance is increasingly becoming more imperative with the passage of time. This is due to the fact that even the irs instructions and information regarding a pfic is less than clear. These tax provisions may impose liability upon the startup if it is not careful to avoid becoming a pfic, to timely inform the fund that the startup has or will become a pfic, or to provide the fund with the much.
Navigating the complex irs passive foreign investment company rules determining which assets require pfic reporting, calculating tax and interest. This webinar will furnish tax advisers with a thorough and practical guide to the reporting of investments in a passive foreign investment company pfic on irs form 8621. Pfic reporting passive foreign investment company the us tax code refers to any kind of corporate mutual fund or investment company outside the u. The pfic, or passive foreign investment company is a foreignbased corporation often used for investment vehicles and funds. One of the provisions of the hire act increases pfic reporting by requiring any u. What is a pfic and what does it mean for us expat workers. Moreover, even the most uptodate consumer tax software such as turbotax does not provide any. There are some exceptions, exclusions, and limitations but the 8621 is a staple in the pfic reporting process. Manual tracking of pfic calculations is tedious, timeconsuming and prone to errorrisk. Exceptions to pfic reporting expat tax professionals. Passive foreign investment company pfic guidance provides new reporting exceptions and clarifications february 20, 2017 in brief certain us persons may become subject to the passive foreign investment company pfic regime if they own an interest in a foreign corporation that invests primarily in passive investments or become us. Fatca reporting applies to any account in a foreign financial institution and to stock or securities issued by a nonu. United states irs issues final pfic regulations kpmg. Persons to make the qualified electing fund qef election for u.
A single form 8621 may be filed with respect to a pfic to report the information required by section 1298f that is, part i, as well as to report information in parts iii through vi of the form and to make elections in part ii of the form. If a company qualifies as a passive foreign investment company pfic or a. Some examples include bvis and foreign mutual funds. Passive foreign investment company pfic guidance provides new reporting exceptions and clarifications february 20, 2017 in brief certain us persons may become subject to the passive. The pfic regulations provide certain exceptions to the general rule that a u. A passive foreign investment company pfic is defined as a nonu. Guide to passive foreign investment company pfic for us. Form 8621 information return by a shareholder of a passive foreign investment company or qualified electing fund is not included in the standard turbotax software package. Final regulations released regarding pfic ownership. Form 5471, information return with respect to a foreign corporation. Pfic passive foreign investment company reporting or sch. Why americans should never own shares in a nonus mutual fund pfic why. Treatybased reporting exception for pfic stock held through a foreign pension fund is expanded to pfics held through all foreign pension funds regardless of entity classification under the temporary. Gainskeeper fundtax is a powerful automated tax reporting solution already relied upon by more than 4,500 u.
These rules are complex, and it is suggested you seek u. These provisions attempt to deny the benefit of tax deferral to u. A passive foreign investment company pfic is a foreignbased corporation that exhibits either one of two conditions. For each year of the pfic ending in a taxable year of a shareholder to which the shareholders section 1295 election applies, the pfic must provide the shareholder with a pfic annual. The annual pfic statements contain reporting information that can enable. You are receiving this email because you signed up for our new. About form 8621, information return by a shareholder of a. Under the temporary regs, pfics owned by a person that is no longer going to be subject to us tax are treated as sold on the last day. Describing a passive foreign investment companypfic. Why americans should never own shares in a nonus mutual fund pfic david kuenzi 20191217t10. Pfic annual information statements for fidelity mutual funds fidelity offers individually customized pfic reporting support for all its mutual. Instructions for form 8621 122019 internal revenue. The first method is the qualified electing fund method qef election. Irs advises taxpayer on verifying proper pfic reporting in an information letter, the irs has advised a taxpayer, who sold his interest in a passive foreign investment company pfic, on the.
Recognizes gain on a direct or indirect disposition of pfic stock, is reporting information with respect to a qualified electing fund qef or section 1296 marktomarket. Information about form 8621, information return by a shareholder of a passive foreign investment company or qualified electing fund, including recent updates, related forms, and instructions on how to file. The irs recently finalized regulations, previously in proposed and temporary form, which provide guidance on. Is reporting information with respect to a qualified electing fund qef or section 1296 marktomarket election, 4. There may be additional 8938 and 5471 reporting as well. In addition, any tax owing from the pfic may be subject to an interest charge. Passive foreign investment companies the tax adviser. Did your client just become not subject to us taxation. The trouble with qef reporting form 8621 calculator.
The annual pfic statements contain reporting information that can enable investors classified as u. Passive foreign investment company pfic statements. The form 8621 is used to report passive foreign investment companies pfic. The software asks for the market value on the date of change and applies the transitional rule automatically. Shareholders who can obtain the necessary information can elect to pay tax on their pro rata share of the pfics current. United states tax alert final pfic regulations clarify ndirect i ownership ssue, i address form 8621 annual reporting requirements on december 27, 2016, the department of the treasury and.
This article discusses options to mitigate the pfic tax consequences and describes the annual u. The qef election is made on form 8621, return by a shareholder of a passive foreign investment company or qualified electing fund, and must reflect the information provided in either the pfic. Pwc israel passive foreign investment companies pfics and controlled foreign corporations cfcs pfic determination irc sec. The most frequently asked question by funds and the us investors is what is the appropriate us tax reporting for the investment interest. Why americans should never own shares in a nonus mutual.
714 1415 117 1461 338 492 1433 939 589 466 553 642 24 1283 207 822 1088 359 1525 1455 281 1177 1060 1211 597 971 1156 827 189 1073 1109 22 1255 382 240 464