The PFIC Regime and Form 8621–A Primer for Tax Professionals, by Frank Agostino, Esq. and Michael Wallace, EA.

The term “Passive Foreign Investment Company” (“PFIC”) is a mystery to many tax professionals. Uninformed tax professionals who prepare returns erroneously assume their clients do not have such foreign investments. Knowledgeable investors thoroughly sensitized to the tax ramifications of interests in foreign corporations can easily forget that foreign mutual funds, hedge funds, foreign exchange-traded funds (“ETFs”), insurance products, and offshore pension plans all have the potential to trigger the PFIC regime. Investors or tax professionals unfamiliar with the PFIC rules can easily be blindsided, with potentially severe consequences. …

Foreign Retirement Plans, by Frank Agostino, Esq.

Recently there has been an increase in Internal Revenue Service (“I.R.S.”) audits related to foreign trusts and assets. Preparers often overlook taxpayers’ interest in foreign retirement plans. Pension, annuity, and other retirement account distributions from sources outside of the United States as well as employer contributions to foreign retirement plans may be fully or partially taxable. Given the potential tax exposure and onerous penalties, it is important to understand the tax treatment and reporting requirements of such plans. This article will discuss: (1) how to determine which country has the authority to tax the retirement plan, (2) I.R.S. forms most often associated with foreign retirement plans, and (3) how to correct noncompliance with reporting requirements. …

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