IRS Form 8621 – IRS Forms, Instructions, Pubs 2026 – If you’re a U.S. taxpayer with investments in foreign entities, understanding IRS Form 8621 is crucial. This form, titled “Information Return by a Shareholder of a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund,” helps the IRS track and tax income from certain foreign investments. It ensures compliance with complex rules around passive foreign investment companies (PFICs) and qualified electing funds (QEFs), which often apply to expats, investors in foreign mutual funds, or those with international holdings. In this SEO-optimized guide, we’ll cover everything you need to know about Form 8621, including who must file, how to complete it, recent updates, and penalties for non-compliance. For the official form, download the PDF here: https://www.irs.gov/pub/irs-pdf/f8621.pdf.
What Is IRS Form 8621?
Form 8621 is an information return used by U.S. persons to report ownership and transactions in PFICs or QEFs. It’s not a tax payment form but provides details on distributions, gains, and elections related to these foreign investments. The form helps the IRS apply special tax rules under sections 1291, 1293, and 1296 of the Internal Revenue Code, which can result in higher taxes or deferred reporting to prevent tax avoidance through foreign entities.
PFICs are common in foreign mutual funds, hedge funds, or other pooled investments where passive income dominates. Without proper reporting, shareholders could face unfavorable default taxation under section 1291, treating distributions as excess and applying high interest charges.
Key Definitions: PFIC and QEF Explained
What Is a Passive Foreign Investment Company (PFIC)?
A PFIC is a foreign corporation that meets either:
- Income Test: 75% or more of its gross income is passive (e.g., dividends, interest, rents, royalties).
- Asset Test: 50% or more of its assets (averaged quarterly) produce or are held to produce passive income.
Publicly traded corporations use fair market value for assets, while non-public ones may elect adjusted basis. Look-through rules apply for 25%-owned subsidiaries, and there’s a CFC overlap rule to avoid dual PFIC/Subpart F treatment.
What Is a Qualified Electing Fund (QEF)?
A QEF is a PFIC for which a U.S. shareholder elects under section 1295 to include their pro rata share of the fund’s ordinary earnings and net capital gains annually, rather than facing excess distribution rules. This election often results in more favorable taxation but requires the PFIC to provide an Annual Information Statement.
Who Must File IRS Form 8621?
You must file Form 8621 if you’re a U.S. person (individual, corporation, partnership, S corporation, nongrantor trust, or estate) and a direct or indirect shareholder of a PFIC in these scenarios:
- Receiving direct or indirect distributions from a PFIC.
- Recognizing gain on disposing of PFIC stock.
- Reporting for a QEF or section 1296 mark-to-market election.
- Making an election in Part II of the form.
- Required to file an annual report under section 1298(f).
Indirect shareholders include those owning through chains of PFICs, 50%-or-more owned foreign corporations, or pass-through entities (partnerships, S corps, trusts, estates). Exceptions:
- Ownership through tax-exempt organizations (e.g., 401(a) plans, IRAs, 529 plans).
- Aggregate PFIC value ≤ $25,000 ($50,000 for joint filers) with no excess distributions or gains.
- Indirect shares ≤ $5,000.
File a separate form for each PFIC. For chains, file for each in the ownership chain. Qualifying insurance corporation shareholders file a limited form if electing under section 1297(f)(2).
When and How to File Form 8621?
Attach Form 8621 to your tax return (e.g., Form 1040) and file by the due date, including extensions. If no return is required, mail to: Internal Revenue Service Center, Ogden, UT 84201-0201. For multiple PFICs, submit a separate form for each.
File annually if required under section 1298(f), even without distributions or gains. Late elections may require Form 8621-A.
Step-by-Step Guide to Filling Out Form 8621
The form (Rev. December 2025) has six parts. Here’s an overview:
| Part | Description | Key Information Required |
|---|---|---|
| Header | Shareholder and PFIC Details | Name, address, ID number, PFIC name/address/EIN, tax year, share classes. |
| I: Summary of Annual Information | Basic PFIC holdings | Share description, acquisition date, end-of-year count/value, PFIC type and excess amounts. |
| II: Elections | Choose applicable elections (A-H) | Check boxes and complete related parts (e.g., QEF for Part III). |
| III: Income From a QEF | Pro rata shares | Ordinary earnings/gains, distributions, deferred tax if Election B made. |
| IV: Gain or Loss From Mark-to-Market | For Election C | FMV vs. basis, unreversed inclusions, dispositions. |
| V: Distributions/Dispositions (Section 1291) | Excess calculations | Distributions, gains, allocations by holding period, tax/interest. |
| VI: Prior Section 1294 Elections | Terminations | Undistributed earnings, deferred tax/interest. |
Attach statements for calculations (e.g., excess distributions, PFIC Annual Information Statement for QEFs). Report foreign currency in USD on new line 15e(2).
Elections Available on Form 8621
Form 8621 allows several elections to manage PFIC taxation:
| Election | Description | When to Use |
|---|---|---|
| A: QEF | Treat PFIC as QEF for annual inclusion. | Avoid excess distribution rules. |
| B: Extend Tax Payment | Defer tax on undistributed QEF earnings. | If no section 951 inclusion. |
| C: Mark-to-Market | Annual fair market value adjustment. | For marketable stock. |
| D: Deemed Sale (QEF) | Recognize gain on deemed sale. | For unpedigreed QEFs. |
| E: Deemed Dividend (QEF/CFC) | Treat post-1986 earnings as excess distribution. | For CFC/QEF overlap. |
| F: Deemed Sale (Former/Section 1297(e) PFIC) | Recognize gain on deemed sale. | Purge PFIC status. |
| G: Deemed Dividend (Section 1297(e) PFIC) | Deemed dividend for overlap. | Includes CFC qualification date. |
| H: Deemed Dividend (Former PFIC) | Deemed dividend to purge status. | For former CFCs. |
Elections are generally made by the return due date; some can be retroactive or late via Form 8621-A.
Recent Changes to Form 8621 in 2026
As of the December 2025 revision (applicable for 2025 tax years filed in 2026):
- New currency code entry above line 15a in Part V.
- Line 15e(2): Report line 15e(1) in U.S. dollars if foreign currency. No other major developments as of January 2026.
Penalties for Not Filing Form 8621
Failure to file can result in:
- Incomplete return penalties (up to 25% of unpaid tax).
- Extended statute of limitations until Form 8621 is filed.
- Denial of foreign tax credits related to PFIC distributions. Always consult a tax professional, as the IRS provides limited personalized guidance.
In summary, Form 8621 is essential for U.S. taxpayers with PFIC or QEF interests to avoid harsh penalties and ensure proper taxation. If you’re unsure, seek expert advice—international tax rules are complex. For more details, visit IRS.gov or download the form PDF linked above.