Question: What is the IRS Form 8621? Answer: The IRS Form 8621 is a two-function form that must be filed by US persons who own an interest in a Passive Foreign Investment Company. The Form both (1) collects information and (2) calculates what is in most cases a special (unfavorable) rate of tax on the dividends and capital gains from shares, units or other interests in passive asset-holding foreign corporations.
The most common example of an interest in a PFIC is shares in a foreign mutual fund or units of a foreign unit trust. However, PFICs can also include an interest in non-publicly traded foreign entities in which 75% or more of its income is of a passive nature (e.g. dividends, interest, royalties, etc.) or 50% or more of its assets (by value) produce such passive income…
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If you failed to file a Form 8621, or filed one that was incorrect, incomplete, or late/delinquent, your tax return is now potentially subject to a ‘frozen’ statute of limitations. This special rule gives the IRS unlimited time to detect and punish your noncompliance, rather than the standard three to six year statute of limitations for most tax errors and omissions.
And Reference Form 8621 filing instructions.
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