Form 8621 and PFIC reporting for U.S. taxpayers with foreign mutual funds

If you are a U.S. citizen, green card holder or U.S. resident and you own units of a foreign mutual fund, you may owe a Form 8621 for every fund, every year. This guide explains who must file, the three tax regimes, what an excess distribution costs, and what records you need. It pays special attention to Indian mutual funds.

Check if you must file

Start here

1. Is your fund a PFIC?

The two tests, the common examples, and why most foreign mutual funds, including Indian ones, are treated as PFICs.

What is a PFIC →

2. Do you have to file?

The five situations that require Form 8621, the exceptions, and a short self-check you can complete in a minute.

Who must file →

3. Which tax rules apply?

The default section 1291 rules, the QEF election and the mark-to-market election, side by side.

Tax regimes →

4. What will it cost?

A worked example of an excess distribution: the 125% test, the spread over your holding period, the extra tax and the interest.

Excess distributions →

Did you know?

A separate Form 8621 is required for each PFIC you hold, directly or indirectly. One fund, one form, and one form can cover every part for that fund.

Source: IRS Instructions for Form 8621 (Rev. 12-2025), Who Must File

Form 8621 is attached to your income tax return and is due when the return is due, including extensions. If you are not required to file a return, it goes directly to the IRS in Ogden, Utah.

Source: IRS Instructions for Form 8621, When and Where To File

A foreign corporation is a PFIC if 75% or more of its gross income is passive, or if at least half of its assets produce passive income or are held to produce it.

Source: IRS Instructions for Form 8621; Internal Revenue Code section 1297

Distributions in the first year you hold a PFIC are not “excess distributions.” An excess distribution is the part above 125% of the average of your distributions in the previous three years.

Source: IRS Instructions for Form 8621, Part V

Under the default rules, the whole gain from selling PFIC stock is treated as an excess distribution. A loss is ignored for these rules.

Source: IRS Instructions for Form 8621, Part V, line 15f

The default “section 1291” rules are not an election. They apply to you automatically when you have made neither a QEF nor a mark-to-market election.

Source: IRS Instructions for Form 8621

Not filing the annual PFIC report can keep the IRS’s time limit open. For the items the missing information relates to, the limit does not end before 3 years after you give the IRS the information.

Source: Internal Revenue Code section 6501(c)(8)

The extra tax on earlier years of a PFIC gain is figured at the highest tax rate in effect for each of those years: 37% for 2018 through 2025.

Source: IRS Instructions for Form 8621, Part V, line 16c

Interest on that extra tax runs from the due date of the return for each earlier year to the due date of the return for the year of the sale or distribution, at the IRS underpayment rate.

Source: IRS Instructions for Form 8621, Part V, line 16f

On the 2025 Form 1040, the extra tax from Form 8621 goes on line 16 (check box 3 and write 1291TAX). The interest goes on Schedule 2, line 17p.

Source: IRS Instructions for Form 8621, lines 16e and 16f; 2025 Schedule 2 (Form 1040)

Shares held through an IRA, 401(k) or similar tax-favored account are generally not treated as owned by you for Form 8621 purposes.

Source: IRS Instructions for Form 8621, Who Must File

The IRS revised Form 8621 and its instructions in December 2025. The revision before that was December 2018.

Source: IRS About Form 8621; IRS prior-year forms

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Common problems we help solve

Indian mutual funds (SIPs, dividend reinvestment, switches between schemes) that created Form 8621 duties nobody explained
A sale or redemption of a foreign fund, and the question of how much extra tax and interest it brings
Years in which Form 8621 should have been filed and was not, and how to correct them
Choosing between the default rules, a QEF election and a mark-to-market election
Becoming a U.S. person after you already owned the funds (new green card holders and new residents)
Making Form 8621, FBAR, Form 8938 and your tax return agree with each other
Getting records together: consolidated account statements, unit counts, values and exchange rates

ImportantThis site explains the rules in general terms. Each situation depends on the facts, including your residency, the funds, your holding periods and the tax years involved. Do not rely on a single example for your own filing.

Our help

We identify which of your holdings are PFICs, work out the tax under the rules that apply, prepare or review Form 8621 for each fund and year, and explain the options when past years were missed. See what we offer and how to start.

Official sources behind this guide: the IRS Instructions for Form 8621 and the IRS Form 8621 page.