Form 8621 Penalty: Tax Return Statute of Limitations Will Not Expire (2024)

FAQs

What is the statute of limitations on form 8621? ›

Unfiled Form 8621 Means an Incomplete Tax Return

Unless a person committed fraud and/or has more than $5000 of unreported foreign income or omitted more than 25% of gross income in the return, the statute of limitations the IRS to audit your tax return is three (3)years.

Penalties for failure to file Form 8621 could include a $10,000 penalty (under Form 8938), and suspension of the statute of limitations with respect to the U.S. shareholder's entire tax return until Form 8621 is filed.

For those filing single or married filing separately, form 8621 must be filed in any year that their total number of PFICs exceed $25,000. For married filing jointly, the combined PFIC ownership must exceed $50,000 for the form to be required.

The Failure to File Penalty is calculated in the following way: 5% of the unpaid taxes for each month or part of a month that your tax return is late. The penalty will not exceed 25% of the total unpaid taxes.

Once the original date under the statute of limitations is extended by a signed consent, it may be further extended by the mutual agreement of the parties before the expiration date of the previous extension period. The fixed-date consent is used for most examination and appeal activities.

A U.S. person that is a direct or indirect shareholder of a passive foreign investment company (PFIC) files Form 8621 if they: Receive certain direct or indirect distributions from a PFIC. Recognize a gain on a direct or indirect disposition of PFIC stock.

How much does it cost? The base fee is $165 USD / $220 CAD per form when the transactions are submitted in an excel format. There is an additional $165 USD / $220 CAD hourly charge for transactions submitted using statements or other documents. Jobs over 10 forms require a 50% retainer.

Transparent Pricing: We offer competitive pricing for our Form 8621 Preparation Service. The base fee is $165 USD / $220 CAD per form when transactions are submitted in an excel format. Additional charges apply for transactions submitted using statements or other documents.

The Failure to File penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late.

Attach Form 8621 to the shareholder's tax return (or, if applicable, partnership or exempt organization return) and file both by the due date, including extensions, of the return at the Internal Revenue Service Center where the tax return is required to be filed.

Does H&R Block support form 8621? ›

U.S. Tax Form 8621 for Shareholders of Passive Foreign Investment Companies. If you need to report income for foreign mutual funds (PFICs), learn more about IRS Form 8621 with the Expat tax experts at H&R Block.

Shareholders with a 10 percent or more interest in a CFC in which other U.S. shareholders own and control the stock are not subject to the PFIC rules. A startup can avoid the PFIC designation if all U.S. shareholders own their interest through a corporation that holds a 10 percent or more interest in the CFC.

Review the Form 2210 instructions for the year you have an estimated tax penalty. If you qualify for a waiver, send Form 843 or a letter with a full explanation about why the IRS should remove your estimated tax penalty, and attach any supporting documentation. You must sign and send in a written request to the IRS.

The following formula is used: [(mortgage rate/months in a year) x mortgage balance) x 3 = penalty. Example: Let's say that you wanted to pay out a $300,000 mortgage with a variable rate of 3%. The approximate penalty would be $2,250.

IRS Definition

A failure to file penalty is charged on returns filed after the due date or extended due date, absent a reasonable cause for filing late. The combined penalty is 5% (4.5% late filing and 0.5% late payment) for each month or part of a month that your return was late, up to 25%.

There is a statute of limitations on refunds being claimed on amended returns. In general, if a refund is expected on an amended return, taxpayers must file the return within three years of the due date of the original return, or within two years after the date they paid the tax, whichever is later.

6-Year Foreign Income Statute of Limitations: In most situations, the IRS has 3-years to audit your tax return (26 U.S. Code §6501). But, when the audit involves foreign income generated from certain offshore accounts, assets or income, the statute of limitations may extend to 6-years.

Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.

Statute of limitations

The IRS generally has three years after an original return is filed to assess income taxes. A return will be deemed to have been filed on its original due date even if the return is actually filed on an earlier date.