PFIC Tax calculation

Forum|Forum|5 years ago
July 6, 2020
2 replies
0 views

I became a tax resident in the US in 2017. I have investments in PFICs, that were started back in 2010 or earlier. According to IRS, when I make a sale of the PFIC, I have to allocate the profit to every year since I started the investment. Let's say that I have to allocate the amount to 10 past years.

Since I became a tax resident in the US in 2017, and had no financial activity or presence in the US prior to 2017, do I owe any tax to the US govt for those years (prior to 2017)? Can you guide me to the relevant IRS guidance?

I had purchased Turbotax premier hoping that it will have some information regarding PFIC tax calculations. However, after purchasing it, I realized that it support only US based mutual funds.

SusanY1

You are correct that TurboTax does not support PFIC taxations or the reporting form, Form 8621 due to their very complex nature.

You are only responsible for reporting on PFICs that you have owned since the date you became a U.S. person for tax purposes. In your case, this sounds like it would be 2017.

Most of the information that you are seeking can be found in the Form 8621 instructions here: Form 8621 Instructions. However, the instructions aren't particularly user friendly.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

shibupillaiAuthor

I have a followup question.

You said that: "You are only responsible for reporting on PFICs that you have owned since the date you became a U.S. person for tax purposes. In your case, this sounds like it would be 2017."

Does it mean that I am not responsible for reporting the PFIC that was acquired before I became a US person?

Those PFICs were reported to IRS in my 2018 tax return. However there were no transactions on it. Can I not report those in 2019? Is there a way to inform IRS that those PFICs were acquired before I became a US person?

thanks,

Shibu Pillai.

SusanY1

My apologies for not being more clear. You only report the transactions and income involving the PFICs from the date you became a U.S. person. You do not have to report any transactions prior to the date that you became a resident for tax purposes.

PFICs that you purchased prior to becoming a U.S. person are essentially treated as if you acquired them on that date.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

aybiz

Hi @shibupillai and @SusanY1,

Thank you for the very useful information. I am able to fill out the form based on your insights, except the last line on interest charge on the additional tax. Where did you find the interest rate and explanation on how to calculate the interest? Thanks!!