DO NOT Purchase Foreign Mutual Funds - Or You May Have to File Form 8621 Which Could Take you 48 hours

If you live abroad, or in the USA, do not make the mistake of purchasing a foreign mutual fund.  Why?  Such You must file as separate form for each foreign mutual fund each year.  If the aggregate value of your PFIC stocks are less than $25,000 if filing as single for $50,000 if fiing jointly you are excepted from filing.  There are other exceptions but they are complex and you should read 8621 Instructions to see if your particular situation is excepted.

The IRS estimates it could take 48 hours to analyze the data, analyze the law and then complete the form for just one foreign mutual fund investment (if not excepted from filing). You can  only guess the amount professional tax return preparers will charge to complete these forms.

What is solution to avoid this horrendous tax return problem?  Only purchase foreign stocks directly owned in your own name since these are treated the same as US stocks and the purchase, sale and reporting would be the same as for US stocks. An alternative is to purchase US mutual funds that invest in foreign stocks (these are not considered PFICs) and again treated the same on your tax return as a US stock.