Foreign Mutual Fund, ETF, & the PFIC Tax Problem on Form 8621 (2024 New Update) - Golding & Golding

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In general, Mutual Funds and ETF's can be great investments -- especially for those seeking to put together a "lazy portfolio" to generate passive income. Depending on which foreign country a US Person is considering investing in, that percentage can be significantly higher than a comparable investment in the United States. And, while there are many pros to investing in foreign mutual funds, for U.S. citizens and other Americans -- there are several tax implications and international reporting requirements to be aware of. This is especially true since most Foreign Mutual Funds are considered "PFIC." The complexity will be compounded even further when the Taxpayer ends up having an excess distribution of the foreign mutual fund. The resulting tax liability may negate any tax benefits. Here are 5 tips about why Americans should avoid foreign mutual funds: