It is very common for individuals to have mutual funds in a foreign country (aka Foreign Mutual Funds).
Since 2012, a person is required to report a Foreign Mutual Fund annually as a PFIC on form 8621. This is true, even if the person does not have any “Excess Distributions” from the PFIC (previous to 2012, the Form 8621 was usually limited to having to be filed only when an Excess Distribution was issued).
With that said, it is important to note then main exception to reporting the PFIC when there is no excess distribution.
Under the $25,000/$50,000 PFIC
Even though a person is required to file a form 8621 to report their PFIC, even the IRS understands that this can be a heavy burden for an individual with minimal foreign investments.
As a result, it is important to note there is an exception – in any year in which a person does not have in excess distribution, they may qualify to have their reporting requirement exempted on a Form 8621 if the total value of the foreign mutual funds (not per fund, but all funds in total) are less than $25,000 (single or married filing separate) or $50,000 (married filing joint.
It is important to note that you should speak with an experienced offshore disclosure lawyer first to determine whether you have a reporting requirement and/or whether you have an excess distribution.
Did Not Report the Form in Prior Years?
If you did have a reporting requirement, but failed to do so, it is important to get into compliance quickly and safely. That is because unless you file a form 8621 in the years you were required to — the statute of limitations does not begin to run for that tax year and thus your tax return will remain open indefinitely.
Want to learn more about Offshore Voluntary Disclosure?
Offshore Voluntary Disclosure Tax law is very complex. There are many aspects that go into any particular tax calculation, including the legal status, marital status, business status and residence status of the taxpayer.
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