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By Edward Parsons, CPA · licensed since 2009
Key takeaways
- TurboTax does not include Form 8621. Intuit’s own help article, “Which IRS forms are not included in TurboTax?”, lists it by name.
- The bigger risk is not the missing form. It’s that a return can be finished without it. A 1099 has no box that says PFIC, so a foreign fund’s payouts can be taxed as ordinary or qualified dividends and a sale as a capital gain, under rules that don’t apply to a PFIC.
- Where a consumer tax program does offer Form 8621, check what that means. A form you can type numbers into is not a calculation of those numbers.
- The hard part is Part V, the section 1291 calculation. It needs your full purchase history for each fund, a 125% test for each block of shares, a day-by-day allocation across your holding period, the top rate for each prior year, and interest compounded daily at a rate that changes every quarter.
- Leaving the form off doesn’t remove the tax, and an unfiled Form 8621 can keep the IRS’s time to assess your return open.
- What to do: confirm the fund is a PFIC and that you have to file, then compute Part V with a tool built for it. The PFIC Calculator & Form 8621 Generator fills in the official form for each fund and year and shows every figure behind it.
It usually happens the same way. You prepare your own return, you hold a fund you bought abroad or through a foreign bank, and at some point you read that it might be a PFIC. You open TurboTax to find Form 8621, and it isn’t there.
Many of the PFIC questions that reach my practice start at exactly that point. Others come from people whose software never asked them about a foreign fund at all. This guide explains what the software is and isn’t doing, why Form 8621 is the form consumer tax software leaves to you, and what your realistic options are.
Does TurboTax support Form 8621?
No. Intuit’s own help article, “Which IRS forms are not included in TurboTax?”, lists Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, among the forms TurboTax doesn’t include. The reason Intuit gives is that few taxpayers need them.
So if your return needs a Form 8621, TurboTax won’t produce it. And if you need one, you often need several. The Form 8621 instructions require a separate form for each PFIC, and the duty to file is tested again every year.
Intuit updates that list from time to time, so check the current version before you start a return.
Why does tax software leave Form 8621 out?
Because the form is the easy part. The calculation behind it is not.
Most of a return is built from documents that arrive with the answer already on them: a W-2, a 1099-INT, a 1099-DIV. The software reads the boxes, applies the rules for the year and moves on. Form 8621 doesn’t work like that. For a fund taxed under the default rules of section 1291 of the Internal Revenue Code, Part V of the form needs figures nobody sends you:
- Your whole history with the fund, not one year of it. Every purchase starts its own block of shares with its own holding period. This year’s figures depend on years the software never saw.
- A 125% test for each block. Whether this year’s distribution counts as “excess” depends on what that block received in the three prior years.
- A day-by-day allocation. An excess distribution, or a gain when you sell, is spread across every day you held the shares. The current year and the days before the fund was a PFIC for you go one way. Each prior PFIC year goes another.
- The top rate for each prior year. Each prior year’s share is taxed at the highest rate in force for that year, not at your own rate and not at today’s.
- Interest by the quarter, compounded daily. It runs from each prior year’s due date at the IRS underpayment rate for each quarter, under section 6621 and section 6622.
- PFIC status, year by year. Whether the fund met the income or asset test in each year you held it, and whether an earlier PFIC year still taints the shares.
My guide to the PFIC excess distribution regime explains why the rules are built this way. Here the point is simpler. Software designed around one year’s tax documents has nothing to compute those figures from.
Form 8621 is a calculation problem that happens to come with a form.
What does TurboTax do with a PFIC instead?
It works from your tax documents, and none of them say PFIC.
A 1099 has no box for it. If your broker reports the fund’s payouts as dividends, they go into the return as dividends, at the lower qualified rate if the broker marked them that way. If you sell, the sale goes in as a capital gain or loss. Neither treatment fits a PFIC under the default rules:
- A PFIC’s dividends are not qualified dividends. Section 1(h)(11) excludes a foreign corporation that was a PFIC in the year it paid the dividend or the year before.
- Section 1291 replaces the ordinary rules. Part or all of a distribution can be an excess distribution, and a gain on sale is treated as one. Neither gets capital gain rates. Part of the amount becomes ordinary income this year. The rest carries deferred tax at each prior year’s top rate, plus interest.
If the fund sits in an account abroad, there may be no 1099 at all, and the software never hears about it.
So the return can look complete and still be wrong. Nothing on the screen has to tell you.
What about TaxAct, H&R Block and other tax software?
Some consumer programs do include Form 8621. Before you rely on one, ask what “supports Form 8621” means, because it can mean three quite different things:
| What the software does | What is still left to you |
|---|---|
| Prints a blank Form 8621, or lets you attach one | Everything: every figure, every statement, the form itself |
| Gives you the form’s boxes to type into | Working out every Part V figure, then typing it in |
| Computes Part V from your transaction history | Checking the inputs: every purchase, sale and distribution |
TaxAct, for example, has help pages for Form 8621. They describe it as a fillable form you add through the program’s Forms Assistant. They say the program supports entry of up to 50 Forms 8621 per return, and that a return needing more has to be filed on paper. They don’t describe working out the Part V figures from your purchase and sale history.
At H&R Block it depends on the product. The federal forms lists it publishes for its personal Online and desktop programs don’t include Form 8621, while its expat do-it-yourself product lists the form as an add-on.
The same goes for any other program. Look up your edition’s supported forms for the year you are filing, and then ask the second question: who computes the numbers? A form you can type into is not a calculation. Line 16 is only as right as the figures you bring to it.
I’ve written up the main programs separately, each with the trap that goes with it: TaxAct, H&R Block, FreeTaxUSA, TaxSlayer, Cash App Taxes and expat tax software. For every program side by side, see which tax software supports Form 8621.
What happens if I file without Form 8621?
The tax doesn’t go away, and your return may stay open.
- The section 1291 tax is still owed. Leaving Part V off doesn’t change how an excess distribution or a sale is taxed. It only means the return reports it the wrong way.
- The annual report is a separate duty. Section 1298(f) requires a PFIC shareholder to file an annual report, and Form 8621 is how it is filed. Some years need a form even with no distribution and no sale. Whether yours do turns on the $25,000 and $50,000 exception and the rules in my guide to who must file Form 8621.
- The assessment period can stay open. Under section 6501(c)(8), when required PFIC information isn’t furnished, the IRS’s time to assess tax on the return it relates to doesn’t run out until three years after the information is provided. How much of the return that reaches depends on whether the failure had reasonable cause.
None of this has to be settled in one sitting. It is worth knowing before you decide to file without the form.
What should I do instead?
Work through it in this order. Each step can end the problem early.
- Find out whether the fund is a PFIC. Most foreign mutual funds and ETFs are, but not every one. My guides to whether a foreign mutual fund is a PFIC and whether foreign ETFs are PFICs explain how to tell. The free PFIC Analyzer tests a fund against the income and asset tests.
- Find out which years need a form. Not every PFIC year does, and the exception that relieves some years doesn’t relieve others.
- Find out which method applies. Everything in this guide assumes the default method. If you made a QEF or mark-to-market election, Part V is a different exercise. See how QEF, mark-to-market and the default method compare.
- Compute Part V with a tool built for the section 1291 calculation. Not a number typed into a box, and not a spreadsheet built from scratch, where one formula error repeats through every year. The PFIC Calculator & Form 8621 Generator runs the tests, the 125% test, the allocation, the rates and the interest, and fills in the official Form 8621 for each fund and year.
Then the results have to reach the return your software prepares. That is the next question.
Can I still use TurboTax for the rest of my return?
It can be done, but the two have to agree.
Form 8621 doesn’t keep its results to itself. Part of the result is ordinary income for the year, and the deferred tax and interest are added to the tax on your return. So the return your software prepares has to carry those figures. The dividend or sale it already picked up from your 1099 has to be reported consistently with them: not counted twice, and not taxed under the ordinary rules as well.
Two questions are worth settling before you file, not after:
- Where each Form 8621 figure goes on the return your software produces, and how the 1099 entries are handled alongside them.
- How the form will be filed. The IRS instructions say to attach Form 8621 to your return. Software that doesn’t include the form may not be able to send it with the return electronically.
These are exactly the details where self-prepared PFIC returns go wrong. I’m not going to walk through them here, because the right answer depends on your software, your funds and your years.
How the PFIC Calculator fills the gap
I built the PFIC Calculator & Form 8621 Generator for the person TurboTax leaves at this point: someone who can handle their own return and needs the one calculation consumer software doesn’t do.
- It tests PFIC status for every year you held the fund, with the income and asset tests.
- It runs the section 1291 calculation in full: the 125% test block by block, the day-by-day allocation, the top rate for each prior year, and interest by quarter with daily compounding.
- It fills in the official Form 8621, one per fund per year, with the line 16a statement.
- It shows every figure behind the form in workpapers you can export as PDF, CSV or Markdown, including the year totals and where each one goes on your return.
- It refuses to guess. When a rate or price it needs is missing, the year reads “not computed” instead of showing a figure that looks right and isn’t.
It computes the default method under section 1291. It doesn’t compute QEF or mark-to-market elections. And it is only as good as the transactions you load, which is why the workpapers flag gaps in your history instead of quietly filling them.
I live outside the US. Does any of this change?
Not the form. If you are a US citizen or green card holder living in Canada, the UK or anywhere else, you generally still file a US return, and Form 8621 goes with it. The software you use for your local return is a separate question: Form 8621 is a US form, and it belongs with your US return.
What does change is how often it comes up. A fund set up in the country where you live is a foreign fund from the US point of view. That is why so many PFIC questions come from Americans abroad holding ordinary local investments.
What if I already filed without Form 8621?
That is a different problem, with its own options, and the order you do things in matters. Please don’t amend anything until you know which path fits your years. My guide to catching up on unfiled Form 8621 explains what’s involved.
Glossary
- PFIC (passive foreign investment company): a foreign corporation, including most foreign mutual funds and ETFs, where at least 75% of gross income is passive or at least 50% of its assets produce passive income. See what a PFIC is.
- Form 8621: the IRS information return a US shareholder files for each PFIC, generally one per fund per year.
- Part V: the part of Form 8621 for distributions from, and sales of, a fund taxed under section 1291. Lines 15 and 16.
- Section 1291 (the default method): the rules that apply when no QEF or mark-to-market election is in effect. Excess distributions and gains are spread over the holding period and charged interest.
- Excess distribution: the part of a year’s distributions above 125% of the average received in the three prior years. A gain on sale is treated as an excess distribution.
- Block of shares: shares acquired on the same date, which share a holding period and are tested together.
Frequently asked questions
Does TurboTax support Form 8621?
No. Intuit’s help article “Which IRS forms are not included in TurboTax?” lists Form 8621 among the forms TurboTax doesn’t include. If your return needs one, you need another way to prepare it.
Why didn’t TurboTax flag my PFIC?
A 1099 has no box that says PFIC, and a fund held at a foreign bank may not produce a 1099 at all. So the payouts go in as dividends and a sale as a capital gain, the way the 1099 reports them, under rules that don’t apply to a PFIC.
Can I e-file from TurboTax if I need Form 8621?
The IRS instructions say to attach Form 8621 to your return, and software that doesn’t include the form may not be able to send it with the return electronically. Settle how the form will be filed before you file, not after.
Does TaxAct do Form 8621?
TaxAct’s help pages describe Form 8621 as a fillable form you add through its Forms Assistant, with up to 50 per return before the return has to go on paper. They don’t describe computing the Part V figures from your transaction history, so check who works out the numbers.
Does H&R Block’s software do Form 8621?
It depends on the product. The federal forms lists H&R Block publishes for its personal Online and desktop programs don’t include Form 8621, while its expat do-it-yourself product lists it as an add-on form. Its pages don’t say whether Part V is computed or typed in.
What happens if I leave Form 8621 off my return?
The section 1291 tax is still owed, because leaving the form off doesn’t change how a distribution or sale is taxed. And under section 6501(c)(8), when required PFIC information isn’t furnished, the IRS’s time to assess tax on the related return doesn’t run out until three years after the information is provided.
Do I need Form 8621 if my fund paid nothing and I didn’t sell?
Possibly. The annual reporting requirement can apply in a year with no distribution and no sale, unless an exception relieves that year. The $25,000 and $50,000 exception is the one to check first.
Can I use TurboTax for the rest of my return?
It can be done, but the two have to agree. Part of the Form 8621 result is ordinary income and the deferred tax and interest are added to your tax, so the return your software prepares has to carry those figures, and the 1099 entries have to be reported consistently with them.
What is the best way to calculate Form 8621 Part V?
With a tool built for the section 1291 calculation that shows its work: the 125% test for each block of shares, the day-by-day allocation, the top rate for each prior year and the quarterly interest. The PFIC Calculator & Form 8621 Generator does that and fills in the official form for each fund and year.
I’m not sure my fund is a PFIC. Where do I start?
Start with the free PFIC Analyzer, which tests a fund against the income and asset tests. If it is a PFIC and you need the tax and the forms, move to the PFIC Calculator.
Start with the fund, then the figures. Check whether your fund is a PFIC with the free PFIC Analyzer, then let the PFIC Calculator work out Part V and fill in your Forms 8621, with every figure shown.
TurboTax, TaxAct and H&R Block are trademarks of their respective owners. This guide is not affiliated with or endorsed by any of them. Each product’s features are described from its maker’s own help pages as of this writing and can change.
