Form 8621 — PFIC Reporting for US Expats
If you own foreign mutual funds, ETFs, or certain other foreign investment vehicles, you almost certainly own a Passive Foreign Investment Company (PFIC). The US tax treatment of PFICs is one of the most punitive and complex areas of international tax law — with potential excess distribution tax rates over 37% plus interest charges. Proper Form 8621 elections (such as the Mark-to-Market or QEF election) can dramatically reduce your tax burden. Our CPAs specialise in PFIC analysis and election strategy.
Get started with your filingWho this is for
- ✓ US expats who hold foreign mutual funds, unit trusts, or ETFs in their local country
- ✓ Americans with ISA, NISA, Assurance Vie, or similar accounts holding foreign funds
- ✓ Expats who purchased foreign life insurance or annuity products with investment components
- ✓ Anyone who received foreign funds as an inheritance or gift
- ✓ US taxpayers who have been reporting foreign funds incorrectly or not at all
What this filing may involve
Every situation is different. The forms below commonly apply — your specific filing may vary.
- 1 Form 8621 — Information Return by a Shareholder of a PFIC or QEF
- 2 Form 1040 — with income from PFIC excess distributions or Mark-to-Market gains
- 3 Form 8938 — FATCA reporting for foreign financial assets including PFICs
- 4 FinCEN Form 114 (FBAR) — accounts holding PFIC investments
- 5 Form 3520 — if the PFIC is held inside a foreign trust structure
Documents usually needed
- 📄 Annual account statements for all foreign investment accounts
- 📄 Fund prospectus or information showing the fund's asset composition (to confirm PFIC status)
- 📄 Historical cost basis and acquisition dates for each fund or investment
- 📄 Distribution records for all years held (for excess distribution calculations)
- 📄 Prior year Form 8621 if previously filed
How Nomadic.Tax works
AI-assisted preparation with licensed professional review — every time.
Tell us about your foreign investment accounts and the funds you hold
Our team analyses whether each fund qualifies as a PFIC
We identify the optimal election (Mark-to-Market, QEF, or default excess distribution method) for your situation
A CPA prepares Form 8621 for each PFIC and integrates this into your complete US return
When human review matters
- ⓘ Each PFIC holding requires a separate Form 8621 — filers with multiple funds in multiple accounts may need many forms
- ⓘ Retroactive elections (PFIC purge elections) can sometimes correct prior year positions but require careful analysis
- ⓘ Some foreign pension funds or employer-sponsored plans may inadvertently hold PFICs
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Relevant plans
Choose the package that best fits your situation, or view all plans.
- ✓ Everything in Standard
- ✓ Schedule C & SE for self-employment
- ✓ Multiple income sources and currencies
- ✓ Everything in Premier
- ✓ Foreign Earned Income Exclusion (Form 2555)
- ✓ Foreign Tax Credit (Form 1116)
- ✓ FBAR filing (FinCEN 114) included
- ✓ Everything in Expat
- ✓ Schedules D & E for investments and rentals
- ✓ Foreign asset reporting (Form 8938)
- ✓ FBAR filing (FinCEN 114) included
Frequently asked questions about Form 8621 — PFIC Reporting for US Expats
How do I know if I have a PFIC?
Most foreign mutual funds, ETFs, and unit trusts held outside the US are PFICs. If you have a brokerage account in a foreign country, or hold foreign funds inside a local savings account (like a UK ISA or Japanese NISA), you almost certainly have PFICs. US-listed ETFs and mutual funds are generally not PFICs.
What is the Mark-to-Market election and should I use it?
The Mark-to-Market election treats annual changes in your PFIC's value as ordinary income or loss each year, which is simpler and often more tax-efficient than the default excess distribution method. It generally prevents the punitive interest charges. However, it must be made in a timely manner and cannot always be reversed. Our CPAs evaluate this for your specific funds.
What happens if I don't report my PFICs?
Unreported PFICs remain subject to the default excess distribution method when you eventually sell or receive distributions — meaning all gains are allocated back to prior years, taxed at maximum rates, and subject to interest charges. The effective tax rate can exceed 50-60% depending on how long you held the fund.
I have a UK ISA with funds inside — does that create PFIC issues?
Yes. UK ISAs are not recognised as tax-advantaged accounts by the IRS. Any funds inside your ISA that are foreign mutual funds or ETFs are PFICs, and their gains and distributions are fully taxable in the US each year. We see this frequently with US citizens in the UK.