Form 8621 and PFIC: Frequently Asked Questions

It is the IRS information return for a shareholder of a passive foreign investment company (PFIC) or qualified electing fund (QEF). You use it to report certain distributions, gains, elections and the annual report under section 1298(f). The current revision is December 2025.

A foreign corporation that meets an income test (75% or more of gross income is passive) or an asset test (at least half of its assets produce or are held to produce passive income). Most foreign mutual funds meet one or both.

Indian mutual fund schemes are generally treated as PFICs for a U.S. person, because they are foreign investment funds that are passive on both tests. Confirm each fund with a preparer; the fund house name does not change the answer.

No. A separate Form 8621 is required for each PFIC you own directly or indirectly. If you hold ten schemes, you generally have ten forms for each year one is required.

Possibly. The annual report under section 1298(f) can require Part I every year you hold a PFIC. The small-holding exception may let you skip Part I if the total value of your PFIC stock is $25,000 or less ($50,000 on a joint return) and you had no excess distribution and no gain on a section 1291 fund.

You may skip Part I if the total value of all your PFIC stock on the last day of the year is at or below the threshold ($25,000, or $50,000 on a joint return), and you received no excess distribution and recognized no gain on a section 1291 fund. It does not help if you sold at a gain or received an excess distribution.

Shares held through an IRA, 401(k), 403(b), 457(b), 529 or similar tax-favored account are generally not treated as owned by you for Form 8621. Confirm the account type and the instructions for your year.

With your income tax return, by its due date including extensions. For 2025: April 15, 2026, or October 15, 2026 if you extended. If you are not required to file a return, send it directly to the IRS in Ogden, Utah.

The part of the distributions you receive in a year that is above 125% of the average of your distributions on the stock in the three previous years (or the shorter holding period). In the first year of holding, distributions are not excess distributions.

Under the default section 1291 rules, the whole gain is treated as an excess distribution. It is spread over your holding period; the current-year part is ordinary income and the earlier years are taxed at the highest rate for each year, plus interest. A loss is ignored for these rules.

The highest rate in effect under section 1 for each earlier year. The Form 8621 instructions list 37% for 2018 through 2025.

On the extra tax for each earlier year, from the due date of that year’s return to the due date of the return for the year of the distribution or sale, at the IRS underpayment rate (which changes quarterly and compounds daily).

The QEF election requires the fund to give you an annual information statement with your share of its earnings. Most Indian funds do not, so the election is usually not available.

An election under section 1296 for marketable stock: you include each year’s increase in value as ordinary income, and deduct losses only up to earlier inclusions. Marketable stock means stock regularly traded on a qualifying exchange, or certain funds meeting the conditions in the regulations. An exchange-traded fund may qualify; most unlisted open-ended funds do not.

If you did not have a QEF election from the start, the stock is treated as sold at the end of the first mark-to-market year and the gain is taxed under section 1291.

Yes. A dividend that is reinvested in more units is still a distribution, and each reinvestment buys new units with their own date and cost.

Yes. Each purchase has its own date and cost, and a separate Part V is needed for each block of shares with a different holding period.

Generally yes. A switch or systematic transfer out is usually a sale of the first scheme and a purchase of the second. Each case needs review.

The PFIC rules apply to you for the days you were a U.S. person. Earlier days are treated differently (Treasury Regulations section 1.1291-9(j)). Give your preparer your first U.S. day and your purchase dates.

On the 2025 forms: the ordinary income (line 16b) goes on Schedule 1, line 8z; the additional tax (line 16e) is added on Form 1040, line 16 with box 3 checked and “1291TAX” written; the interest (line 16f) goes on Schedule 2, line 17p.

No. They are different reports with different rules. A fund can be reportable on all three, and the figures should agree.

Only if the PFIC has no EIN. It must be letters and numbers only, without spaces or special characters, 50 characters at most, and used consistently from year to year.

The IRS issued a December 2018 revision and the next in December 2025, so the 2018 revision is the form for tax years 2018 through 2024. Check the IRS prior-year forms page for the form to use for the year you are filing.

The instructions warn that penalties may apply if you are required to file and do not. The Code also keeps the IRS’s time to assess open for the items the missing information relates to, until 3 years after you provide it. The right path depends on the facts. See the missed years page.

The form is public and the instructions are on irs.gov. In practice the computation for several funds, many lots and several years is the hard part. If you file yourself, keep the records and attach a computation.

For each fund: purchase dates, units and cost; dividends; sales and switches; units and NAV at each December 31; exchange rates; Indian tax paid; and the date you became a U.S. person. See the records checklist.

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