Foreign Mutual Funds Tax Reporting

This is unfortunately not an innocuous characterization of mundane investment vehicles and products.

Foreign mutual funds tax reporting. Taxation of a pfic. Failing to disclose these holdings annually could result in an irs audit or criminal tax and information reporting investigation. Reporting foreign mutual funds. Taxation of foreign mutual funds.

If you have money in a teudat sal israeli pension or israeli mutual fund the irs may consider this kind of investment a pfic passive foreign investment company. Yes as to both foreign accounts and foreign non account investment assets. Similar to tax favored foreign retirement trusts such a trust that permits rollover of assets or funds transferred from another tax favored foreign non retirement trust established and operated under the laws of the same jurisdiction will not fail to qualify provided that the trust transferring assets or funds also meets the requirements. When in doubt about your situation it s a good idea to consult a qualified tax expert.

The u s government takes a very heavy hand against taxpayers on issues involving the reporting of foreign mutual funds. Just watch out for foreign based mutual fund companies for which the tax code can be much less forgiving. Section 1291 et seq. Tax code categorizes non u s.

Foreign accounts and foreign non account investment assets held by foreign or domestic grantor trust for which you are the grantor. Items like bank accounts mutual funds and hedge funds all fall under the fbar filing requirements as do certain life insurance policies and funds related to foreign trusts. The tax perils of foreign mutual funds and how to avoid them if you own shares of a foreign mutual fund or other passive foreign investment company you should be aware of the tax implications. Pfics are subject to different more complex tax reporting than regular u s.

Domestic mutual fund investing in foreign stocks and securities. This is because the irs wants to make sure they get their chance to tax the foreign mutual fund in accordance with the pfic anti deferral of tax regime. Pfics are taxed very punitively by the u s. Before 1986 americans paid us tax on foreign capital gains but did not pay us tax on dividends.

Furthermore each pfic must be reported annually on u s. Owning a foreign mutual fund may cause increased u s. Reporting foreign mutual funds. The goal of the pfic regime is anti deferral of tax on certain investment income from overseas.

Yes as to foreign accounts. Since 1986 the irs has viewed most foreign etfs and mutual funds as passive foreign investment companies pfics.