Why PFIC Form 8621 Fees Are So High — The Cost Is in the Workload

The PFIC filing fee paradox: high cost, low balance.

📌 Real Reddit Case Studies: High Fees, Tiny Accounts

Case 1 — Massive paperwork, minimal profit:
A PFIC investor reported that monthly dividend reinvestments produced almost no economic gain—but triggered PFIC reporting year after year.
Source: Reddit PFIC discussion (under £25,000)

Case 2 — £8,500 account → $3,900 in PFIC fees:
The taxpayer was charged $150 per Form 8621 for 27 required filings—totaling $3,900. The fee reflected 27 PFIC calculations, not the £8,500 balance.
Source: Reddit – PFIC filing fee complaint

Key takeaway: PFIC fees are driven by workload and complexity—not account size.

1️⃣ PFIC Costs Are Driven by Complexity, Not Value

Form 8621 isn't a simple tax form. PFIC compliance is a multi-year computational system built on IRC §1291 rules.

• §1291 Excess Distribution Rules: Each distribution must be tested, allocated across all holding years, and subjected to daily compounding interest under §6621.
• Multi-Lot Tracking: Every purchase—especially dividend reinvestments—creates a new lot that must be individually tracked for basis, holding period, and FIFO disposal.

2️⃣ The Time Sink: Data Cleaning & Lot-Level Maintenance

• No clean data: Most clients submit PDFs, scans, or mixed terminology—not structured CSVs.
• Manual classification: Distinguishing dividends vs. distributions vs. return of capital.
• Spreadsheet fragility: One mistake breaks the entire §1291 look-back chain.

Result: Even a “small PFIC” can consume 6–20+ hours of professional time.

3️⃣ The Risk Premium: Audit-Grade Workpapers

• Traceability: Every number on Form 8621 must be defensible and traceable to source transactions, FX rates, and interest factors.
• Penalty exposure: Errors compound across years, increasing interest and audit risk.

High risk → higher professional fees.

4️⃣ Why Many CPAs Avoid PFIC Work

• Low efficiency: Huge workload, low margin.
• High liability: Hard to delegate or standardize.

This is why some professionals advise clients to fully exit PFICs to avoid long-term filing costs.

✅ Final Takeaway

PFIC filing fees are not a function of account value—they are a function of time, complexity, and audit risk. Even a small PFIC balance can require a full §1291 analysis and multi-lot tracking.

Once a PFIC has a distribution or disposition—even with a tiny balance—Form 8621 filing is mandatory.

➡️ Next Article

How many hours does a “simple” PFIC actually take?