PFIC & FBAR Disclosure Rules
Contents
PFIC & FBAR
PFIC & FBAR: A PFIC is an IRS tax mess. It requires an unnecessarily complex analysis, resulting in an (unnecessary) headache for the taxpayer. For the tax return, the PFIC is reported on Form 8621. Each PFIC is reported separately, which is done in order to parse out the income for each PFIC – while ensuring the proper basis remains intact. When it comes the PFIC, reporting on the FBAR is (usually) not as complicated. But, with the IRS still taking an aggressive position on matters involving foreign accounts compliance, it is important be compliant.
How to Report PFIC on the FBAR?
PFIC reporting may vary based on how the PFIC is held.
There is no hard and fast rule on reporting the PFIC on the FBAR, but here are some tips:
Investment Account PFIC
Most U.S. Persons with PFIC are due to the fact that they own foreign investment funds.
If like most U.S. Persons, you were introduced to the concept of PFIC when you learned that your foreign mutual funds are also PFIC, then you would report the account(s) that holds the funds.
For example, if you have 5 mutual funds in an investment account, then the investment account is reported, with the main account number.
Even though there are multiple funds in the account, the main account number itself is reported.
Individually Owned PFIC Funds
If instead, you have separate, individually owned funds, then each fund is identified separately in the FBAR, unless it is part of the same portfolio (maybe).
Passive Investment Funds in Same Portfolio
If the funds are part of the same portfolio, you may be able to gross-up the value of the portfolio and report the total value of the portfolio. That way, the full value of the funds are being reported under the portfolio number – similar to reporting an investment account with all the different funds included under the account number.
PFIC Company vs. Funds
What makes the funds a PFIC, is that the fund itself is an entity, with the taxpayer owning a small number of shares.
If instead, the PFIC is a holding company (for example a BVI), then company is usually not reported on the FBAR, but the individual accounts and investments held by the PFIC are reportable.
Our FBAR Lawyers Represent Clients Worldwide
Our FBAR Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.
