The horrors of retirement planning for #Americansabroad – #PFIC edition


General discussion of how the PFIC rules work in theory:

Discussion of the incredible unfairness and stupidity of the PFIC rules in practice (don’t enter OVDP):

And a comment that says it all:

One thing I didn’t mention is that just preparing the tax return can be problematic. Form 8621 requires a separate form for each tax lot. My wife’s account had reinvested dividends. So we had hundreds of tax lots. So each sale of a PFIC (and we had 6 or so) has it’s own form. Each tax lot splits the form on say a sale. Each dividend has a form per tax lot.
I produced a spreadsheet with about 800 lines for each sale and dividend split by tax lot. My lawyer did parallel calc on only the sale side which was small. Or final numbers matched on sales. The dividend work dwarfed the sale side and only I did it.
So think about this for a bit. I needed to produce something like 500 form 8621′s. I couldn’t spend the time to enter the data into the tax s/w. It would take ages. I knew my officious agent would want the actual forms. My lawyer said so many forms would annoy her and she would instead take a spreadsheet. My lawyer gave her a spreadsheet but I wrote a C# program using itextsharp to take the spreadsheet I had and automatically generate the form 8621 and insert them into the tax returns.
Like I expected she wanted the real returns. She had already been saying how hard it would be to comply with their rules. By the end of the day I dumped the massive tax returns on her. It must have burned her up inside. Totally useless. Hundreds and hundreds of forms to wade through with little value. She redid the calcs and came up with bigger PFIC taxes.
I looked at her numbers and saw her mistake in minutes, My lawyer pointed her to the temp regs with the non-PFIC days and she caved:
>I revised the pfic calculations and came very close to the amounts you computed. I will make changes based on amounts you provided on the amended 1040 for 2010.

So my self prepared, hacked up by a computer program tax returns got accepted into OVDP even though my lawyer had originally said they had to be prepared by a CPA. I couldn’t stand paying the huge fees a second time. I was so happy at this point.
Within a few days we got here to exclude one PFIC account even though it had the same account number as another non-compliant account.
I paid my Obama taxes at that point to be rid of the whole thing.
The IRS has been sitting on my 2011 tax return for 7 months as the original was filed expecting we would take the OVDP modified mark to market calc. Once I get this over with the whole lot is done. That’s not part of OVDP though. We have exited the program knowing never to talk to the IRS again.

By the way, this comment’s only crime was trying to invest for retirement. Simply unbelievable.




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