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Form 8621 Increase in Tax and Interest Calculations-2025

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The document outlines the calculations and reporting requirements for Form 8621, which is used by shareholders of Passive Foreign Investment Companies (PFICs) to report excess distributions and tax liabilities. It includes details on holding periods, distribution amounts, foreign tax credits, and additional tax calculations for the years 2012 to 2015. The form also provides instructions for making various elections related to PFIC taxation.

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How does the IRS tax interest income?

Most interest income is taxable-that is, it is subject to income tax. Tax-exempt interest income is not subject to income tax and is earned on funds loaned to states, cities, counties, or the District of Columbia. In most cases, interest income is reported on Form 1099-INT.

How does interest work on an IRS payment plan?

The IRS charges interest on the unpaid balance. Interest is calculated based on the federal short-term rate plus 3%. For the most current rates, consult the IRS interest rates. Along with interest, there is a late payment penalty of 0.5% of the unpaid balance per month.

What is the tax rate for PFIC?

PFICs income distributions are taxed as ordinary income at a rate as high as 40%. To make PFICs even more off-putting, you could be subject to compounded interest charges if you defer income and gains from a PFIC.

How is IRS tax interest calculated?

Generally, interest accrues on any unpaid tax from the due date of the return (without any extensions) until the date of payment in full. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest compounds daily.

How to calculate IRS interest?

Interest is computed to the nearest full percentage point of the Federal short term rate for that calendar quarter, plus 2% for corporate overpayments under $10,000, and plus 0.5% for the excess over $10,000. Calculate interest by multiplying the factor provided in Rev. Proc. 95-17 by the amount owing.

8621 calculator

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What is the threshold for 8621 reporting?

The IRS isnt interested in making everyone file Form 8621 for owning a single foreign stock. The thresholds for reporting are: Single or married filing separately: More than $25,000 in PFICs. Married filing jointly: More than $50,000 in PFICs.

What triggers form 8621?

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 interest does the IRS charge for owed taxes?

Between interest and penalties, the interest is easier to calculate. The IRS interest rate is determined by the Federal short-term rate plus 3% for most individuals. The federal short-term rate as of Jan 2022 is . 44%.