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Reporting Canadian PFICs to the IRS

Author: Brad Howland
First Posted: Dec. 8, 2014

U.S. citizens and resident aliens who have funds in Canadian “Passive Foreign Investment Companies” (PFICs) are now required to file an information return with the IRS: Form 8621 Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. Canadian mutual funds and certain other investments are considered PFICs and Form 8621 should be filed to report them.

Form 8621 is filed by attaching it to your tax return, and filing both by the due date for the return. U.S. citizens or resident aliens living outside the United States generally have an automatic two-month extension of time to file 1040 returns, which would make the due date June 15, 2015 for a 2014 Form 8621.

The instructions for Form 8621 are insanely complicated. The IRS estimates it could take more than 46 hours to complete and file the form (15 hours of record-keeping, 11 hours of study, and 20 hours of preparation). I don't pretend to fully understand every aspect of it, but here are some of the key points:

Elections

Non-Elections

Many U.S. taxpayers living in Canada, after reading the above, will be understandably nervous about their U.S. returns. Form 8621 may or may not cause an increase of overall U.S. tax. It depends on the circumstances of the individual taxpayer: what the primary income type is (earned, investment, retirement, etc.), and what kind of investments are held. It is probably more important now than ever before to consult with a U.S./Canada tax preparation expert. We are unfortunately booked up at the moment and not taking on new clients.

Related Websites

Form 8621 and Instructions


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