Instructions for Filling Out Form 8621

Instructions for Filling Out Form 8621

Written by 
Pilot Team
January 5, 2023
Instructions for Filling Out Form 8621

This document offers comprehensive instructions for completing Form 8621, used by shareholders of Passive Foreign Investment Companies (PFICs) or Qualified Electing Funds (QEFs) to report information to the IRS. It covers various elections, reporting requirements, and calculations related to PFICs or QEFs.

In this article, we'll provide information on Form 8621 and a step-by-step guide on how to fill it out.

What is Form 8621?

Form 8621 is an Information Return filed by shareholders of Passive Foreign Investment Companies (PFICs) or Qualified Electing Funds (QEFs) to report and calculate tax obligations related to their investments. The purpose of this form is to provide the IRS with information about investments in PFICs and QEFs by U.S. persons, calculate and report income, distributions, and gains associated with such investments, and make various elections regarding the treatment of these investments for tax purposes.

Key points about Form 8621 include its requirement for U.S. persons who are direct or indirect shareholders of PFICs under certain circumstances, the ability to make elections such as treating the PFIC as a QEF or making a mark-to-market election, and specific instructions for calculating income or loss from QEFs or PFICs, reporting distributions, and detailing the tax consequences of these investments.

Who Must File Form 8621?

Form 8621 must be filed by U.S. persons who are direct or indirect shareholders of a Passive Foreign Investment Company (PFIC) under five specific circumstances: 1) receiving certain direct or indirect distributions from a PFIC, 2) recognizing gain on a direct or indirect disposition of PFIC stock, 3) reporting information with respect to a Qualified Electing Fund (QEF) or section 1296 mark-to-market election, 4) making an election reportable in Part II of the form, and 5) being required to file an annual report pursuant to section 1298(f).

Form 8621 Tax Filing Deadlines and Due Dates

  • The general due date for filing Form 8621 is by the due date, including extensions, of the shareholder's tax return for the year.
  • Specific elections, such as the QEF Election (Election A) or the Mark-to-Market Election (Election C), must be made by the due date, including extensions, of the tax return for the first tax year to which the election applies.
  • The Deemed Sale Election in connection with a QEF Election (Election D) must be made by the due date, including extensions, of the original tax return for the tax year that includes the qualification date.

Form 8621 Late Payment Penalty

Although the instructions for Form 8621 do not explicitly mention a specific late payment penalty, taxpayers should be aware that penalties related to late filing or payment are generally covered under the broader tax code and IRS regulations. To avoid potential penalties and interest, it is advised that taxpayers file and pay any taxes due on time.

Step-by-Step Instructions for Form 8621

Step by step instructions for filling out Form 8621:

  1. Part I. Summary of Annual Information: Filers must describe each class of shares held, provide acquisition dates, list the number of shares held at the end of the tax year, indicate the value of the shares, and specify the type of PFIC and the amount of any excess distribution or gain treated as an excess distribution under section 1291, inclusion under section 1293, and inclusion or deduction under section 1296.
  2. Part II. Elections: This part requires filers to make and report various elections related to the PFIC, such as treating the PFIC as a QEF, extending the time for payment of tax, marking to market PFIC stock, and others. Specific instructions are provided for each type of election.
  3. Part III. Income From a QEF: Filers must report their pro rata share of the ordinary earnings and net capital gain of the QEF, and if applicable, distributions received from the QEF.
  4. Part IV. Gain or (Loss) From a Section 1296 Mark-to-Market Election: This part is for reporting gain or loss from marking to market PFIC stock under section 1296.
  5. Part V. Distributions From and Dispositions of Stock of a Section 1291 Fund: Filers must report distributions received from a section 1291 fund and any gain recognized on the disposition of stock in a section 1291 fund.
  6. Part VI. Status of Prior Year Section 1294 Elections and Termination of Section 1294 Elections: This part is for reporting the status of prior year section 1294 elections and any terminations of such elections during the tax year.

The page also includes a notice about the Disclosure, Privacy Act, and Paperwork Reduction Act, explaining the legal basis for requesting the information on the form, how it may be used, and the estimated time burden for completing the form.

How to Submit Form 8621

To submit Form 8621, attach it to the shareholder's tax return (or, if applicable, partnership or exempt organization return) and file both by the due date, including extensions, at the Internal Revenue Service Center where the tax return is required to be filed. If not required to file an income tax return or other return for the tax year, file Form 8621 directly with the Internal Revenue Service Center, Ogden, UT 84201-0201. Ensure to complete all applicable parts of the form, provide accurate information, and consider specific elections that may apply to your situation.

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