Form 8621 Penalty: Tax Return Statute of Limitations Will Not Expire

Form 8621 Penalty: Tax Return Statute of Limitations Will Not Expire

Understanding the IRS Form 8621 Penalty

Form 8621 Penalty: PFIC (Passive Foreign Investment Reporting) to the IRS is handled by filing an annual Form 8621.The failure to file the form does not directly result in a monetary penalty. Rather, the tax return may stay open indefinitely. 

Therefore, this may lead to significant fines and offshore penalties to the Taxpayer.

Unfiled Form 8621 Means an Incomplete Tax Return

Unless a person committed fraud and/or has more than $5000 of unreported foreign income or omitted more than 25% of gross income in the return, the statute of limitations the IRS to audit your tax return is three (3)years.

But, if you are required to report a form 8621 but failed to do so, that means your tax return is incomplete and the IRS can go back and audit you forever on that return (aka the Statute of Limitations does not expire).

8938 Penalties can stem from 8621 Penalties

The failure to file form 8621 can lead to penalties. The very technical reading of the form will reveal that the penalties can be issued through the FATCA form 8938. In other words, by failing to file form 8621 a person may still be penalized under the rules of form 8938, which is the FATCA Form.

Failure-to-File May Lead to a Criminal Investigation

The excess distribution calculation under form 8621 is comprehensive, and generally leads two tax/penalties which are significantly higher than the individual would paid under other investment schemes. Instead of performing the proper analysis, there are many unscrupulous CPAs and Attorneys who are offering to simply “book the income as capital gains or dividends.”

By agreeing to this intentional underreporting, you are knowingly underreporting your tax liability, which is a crime called tax fraud and/or tax evasion.

Golding & Golding: About our International Tax Law Firm

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