Tax season can be stressful, and let us be honest — mistakes happen. Maybe you forgot a form, entered the wrong income amount, or left out a deduction. The good news? The IRS expects this sometimes, and they have made it possible to fix errors even after you have filed. It is called amending your return, and here is what you need to know.

If you are a U.S. taxpayer with international ties—whether through business ventures, investments, or living abroad—you have likely encountered the maze of IRS forms designed to track foreign income and entities. One form that often flies under the radar but carries significant weight is Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs). This form frequently comes up in discussions about foreign business ownership and compliance. So, when exactly does Form 8858 apply? Let’s break down the common scenarios and arm you with the knowledge to stay compliant and penalty-free.

For U.S. taxpayers living abroad, staying compliant with IRS tax obligations can be overwhelming—especially when it comes to foreign income and account reporting. If you have unintentionally fallen behind on your U.S. tax filings, the IRS offers a solution: the Streamlined Foreign Offshore Procedures (SFOP). This program helps eligible taxpayers catch up on their filings without facing harsh penalties.

As a US expat living in Ivory Coast, you must navigate tax obligations in both the United States and Ivory Coast, which can be complex due to the differences in their tax systems and the lack of a tax treaty between the two countries. Below is a comprehensive guide to understanding your tax responsibilities, potential relief options, and reporting requirements.

If you started a job, got RSUs, had to leave the U.S. because your initial work permission wasn’t extended, and later came back with new authorization, your tax situation depends on timing and residency.

1. Your Tax Residency at Each Step

• Early Work Period: You are likely a non-resident for tax purposes unless you have been here long enough to trigger residency (183 days over a 3-year lookback).

• While Abroad: If you are out of the U.S. and don’t meet the day-count test, you are a non-resident—unless you kept strong U.S. ties (like a home), which might keep you taxable here.

• After Returning: Once back and staying 183+ days in a year, you are a resident, taxed on all income, including RSUs.

2. RSU Taxation Based on Vesting

• Vesting While Abroad:

  • Non-Resident: Only the portion of RSU value tied to your U.S. workdays is taxed here. Your home country might tax the rest.

  • Still a U.S. Resident: If you didn’t fully cut U.S. tax ties, the full value could still be taxable here.

• Vesting After Returning: If RSUs vest after you are back and a tax resident, the entire value is U.S. taxable income.

3. Extra Factors

• Double Taxation Rules: Some countries have agreements with the U.S. to avoid taxing the same income twice—check if yours does.

• State Taxes: States like California might tax RSUs based on where you are when they vest, even if you were abroad earlier.

• Reporting Assets: Holding RSUs or cash abroad might mean extra U.S. tax forms if values exceed thresholds (e.g., $10,000).

4. Action Steps

• Confirm Residency: Track your days in the U.S. and get advice to nail down your status each year.

• Know Vesting Dates: Match RSU vesting to your location and tax residency—your employer’s stock plan team can help.

• Seek Help: This mix of moves and equity needs a pro who understands cross-border taxes.

3. What Happens When I Sell RSUs?

Q: How are RSU sales taxed?
After vesting, selling RSUs triggers capital gains or losses. The clock starts at vesting:

• Held less than a year? Taxed like regular income.

• Held over a year? Lower capital gains rate.

4. How Do I File Taxes Across These Shifts?

Q: What’s my filing option in a transition year?
If you become a tax resident mid-year:

• Split-Year Filing: Treat part of the year as non-resident, part as resident. Fewer deductions, though.

• Full-Year Resident: Opt for this if it unlocks tax breaks like the standard deduction.

Q: Do I need special forms for my early time?
You might need a form (like a statement of exempt days) to show you weren’t a resident early on—attach it to your return if splitting the year.

5. What About State Taxes?

Q: Do states follow the same rules?
Not always. Some states tax you as a resident all year if you live there, even if the U.S. says you are part-year.

• Example: RSUs vest after moving to New York? The state taxes it all, even if granted earlier.

Key Takeaways

• Residency: It flips based on days here—183+ in a year makes you a tax resident.

• RSUs: Taxed at vesting, fully in the U.S. if you are a resident then.

• Filing: Split-year or full-year filing depends on your goals.

• Leaving and Returning: Where you are when RSUs vest drives the tax hit.

Got RSUs vesting soon or filing taxes after moving in and out of the U.S.? Save this, and if it’s overwhelming, ping a tax expert who gets these twists.

As a real estate agent, you’re constantly on the move—meeting clients, staging homes, handling marketing, and closing deals. With all these expenses, the IRS offers several tax deductions to help you keep more of your hard-earned money. Understanding and utilizing these deductions can significantly reduce your taxable income and boost your bottom line.

For agents in California, especially in high-cost markets like the San Francisco Bay Area, maximizing deductions is crucial to offset the expenses that come with operating in one of the most competitive and expensive real estate landscapes in the country.

1. Vehicle & Mileage Expenses

Bay Area real estate agents often drive across multiple counties—from San Francisco to Silicon Valley to the East Bay. You can deduct either the standard mileage rate (67 cents per mile in 2024) or actual vehicle expenses (gas, insurance, repairs, depreciation). Given the heavy traffic and high fuel prices in California, tracking business miles can lead to significant savings.

2. Home Office Deduction

If you have a dedicated space in your home used exclusively for business, you may qualify for a home office deduction. This includes a portion of:

• Rent or mortgage interest (especially useful given California’s high property costs)

• Utilities

• Property taxes

• Home insurance

• Maintenance and repairs

You can calculate this deduction using the simplified method ($5 per square foot, up to 300 square feet) or the actual expenses method, which allocates costs based on the percentage of your home used for business.

3. Marketing & Advertising

To attract clients in a competitive market like the Bay Area, you likely invest heavily in marketing. The good news? These costs are tax-deductible! Eligible expenses include:

• Website development and maintenance

• Online and social media advertising (a must for tech-savvy Bay Area buyers and sellers)

• Business cards, flyers, and promotional materials

• Professional photography and staging costs

4. Professional Fees & Licensing

Maintaining your real estate license and industry memberships comes with costs that you can deduct, such as:

• California real estate license renewal fees

• Multiple Listing Service (MLS) dues (critical in areas like the Peninsula and East Bay)

• National Association of Realtors (NAR) and California Association of Realtors (CAR) membership fees

• Continuing education and training courses

5. Office Expenses & Supplies

Whether you work from home or rent office space in a high-rent city like San Francisco, common expenses are deductible, including:

• Desk fees paid to your brokerage

• Office rent

• Computers, printers, and software (CRM tools, DocuSign, etc.)

• Business phone and internet bills

• Office supplies like paper, pens, and notebooks

6. Meals & Entertainment

Business meals with clients, referral partners, or networking groups are 50% deductible. Whether it’s a coffee meeting in Palo Alto or a dinner with clients in downtown San Francisco, keep receipts and document the business purpose of each meal.

7. Travel Expenses

If you travel for real estate conferences, training events, or property showings outside your usual market, you can deduct expenses such as:

• Airfare

• Hotels and lodging (especially if attending industry events in Los Angeles or San Diego)

• Rental cars or ride-share costs

• Meals while traveling (50% deductible)

8. Employee & Contractor Payments

If you hire assistants, photographers, or marketing specialists, their wages and contractor payments are deductible. Many Bay Area agents work with professional videographers to create high-end listing videos—these costs can be written off. Keep track of payments and issue 1099 forms for independent contractors earning over $600 per year.

9. Insurance & Retirement Contributions

• Errors & Omissions (E&O) Insurance: Protects against legal claims and is fully deductible.

• Health Insurance Premiums: If you’re self-employed and not covered under another plan, these premiums are deductible.

• Retirement Contributions: Contributions to a SEP IRA, Solo 401(k), or SIMPLE IRA reduce taxable income while helping you save for retirement—especially important for independent agents looking to build long-term wealth.

10. Depreciation of Business Assets

Larger purchases like office furniture, computers, or company vehicles can be depreciated over time. The Section 179 deduction allows real estate agents to write off certain business assets immediately rather than spreading the deduction over several years.

Final Tips for Maximizing Deductions

• Keep Accurate Records: Use apps like QuickBooks or MileIQ to track expenses and mileage.

• Save All Receipts: Digital or physical copies will help if you’re audited.

• Work with a CPA: A tax professional familiar with California real estate laws can ensure you maximize savings while staying compliant with state and federal tax regulations.

By leveraging these deductions, real estate agents can significantly reduce their tax liability and keep more of their income. Stay organized, track your expenses, and consult a tax expert to optimize your deductions each year!

Got tax questions? Book a call with us!

Scenario 1: First-Year U.S. Resident with Foreign ETFs

Question Recap: You moved to the U.S. in 2023 on a work visa and are filing your first tax return as a U.S. resident. You’ve discovered the PFIC rules and Form 8621 while preparing your return, particularly regarding ETFs held in your home country’s retirement accounts. You’re concerned about high tax rates, taxes on unrealized gains, and the cost of compliance. You’re also wondering if Form 8621 applies to you and why these rules target someone in your situation rather than others with larger offshore holdings.

Explanation: A PFIC is defined as a foreign corporation where at least 75% of its income is passive (e.g., dividends, interest) or 50% of its assets generate passive income. Many foreign ETFs and mutual funds, including those in retirement accounts, meet this definition. As a U.S. resident for tax purposes, you’re subject to U.S. tax rules on worldwide income, which includes reporting PFICs on Form 8621.

Form 8621 is required for each PFIC you own, directly or indirectly, unless an exception applies (e.g., total PFIC value under $25,000 for individuals, though this exemption has conditions). The default tax treatment taxes “excess distributions” (e.g., gains upon sale) at the highest ordinary income rate, plus interest on deferred tax. Alternatives like the Qualified Electing Fund (QEF) or mark-to-market elections may reduce the tax burden but require specific information from the fund and additional calculations.

The rules apply regardless of your intent or the size of your holdings because they’re designed to ensure U.S. taxpayers report foreign investments consistently. Foreign retirement accounts aren’t automatically exempt, as the IRS doesn’t recognize their tax-deferred status unless covered by a specific tax treaty.

Options to Consider:

• Confirm whether your ETFs are PFICs (check fund documentation or consult a tax professional).

• File Form 8621 for 2023 if applicable, choosing a tax method based on available data.

• Explore selling the ETFs and reinvesting in U.S.-based funds, noting any home country taxes or penalties.

• Work with a tax advisor to assess costs and compliance requirements specific to your situation.

Scenario 2: Starting PFIC Compliance Without Amending Past Returns

Question Recap: You hold overseas mutual funds and are addressing PFIC compliance. A CPA advised starting compliance with the current year’s return rather than amending past ones, suggesting the IRS may not actively enforce prior non-filing due to limited automated oversight. You’re seeking experiences from others who’ve taken this approach, insight into IRS enforcement, and tips for managing compliance.

Explanation: Form 8621 must be filed annually for each PFIC, even if no distributions occur, unless an exception applies. The IRS doesn’t currently issue automated notices for missing Form 8621s, unlike some other forms. Enforcement typically occurs during audits, often triggered by unrelated issues like unreported foreign accounts or significant income discrepancies. If Form 8621 was never filed, the statute of limitations may remain open for those tax years, allowing the IRS to assess penalties later.

Some taxpayers choose to begin filing Form 8621 in the current year without amending prior returns, particularly if past PFIC activity was minimal. Others opt to amend past returns or use programs like the Streamlined Filing Compliance Procedures to report prior omissions, depending on their risk level and exposure.

Options to Consider:

• Begin filing Form 8621 with your 2023 return, selecting a tax method (default, QEF, or mark-to-market) based on available fund data.

• Evaluate amending past returns if your PFIC holdings or distributions were significant, weighing the cost against potential audit risk.

• Shift future investments to U.S.-based funds to simplify reporting.

• Consult your tax advisor to determine the best approach for your specific circumstances and document your compliance efforts.

Scenario 3: Dual U.S./Canada Citizen with Canadian ETFs

Question Recap: As a dual U.S./Canada citizen living in Canada, you’ve invested in VFV (Vanguard Canada’s S&P 500 ETF), worth $200,000 with $50,000 in gains. You’ve learned VFV is a PFIC and provides a PFIC Annual Information Statement. You’re considering selling it, paying taxes on the gains, and buying U.S. ETFs instead. You’re asking if Canadian ETFs are problematic for U.S. citizens and whether selling resolves past non-compliance.

Explanation: VFV, as a Canadian-registered ETF, is classified as a PFIC under U.S. tax rules, even though it tracks a U.S. index like VOO. U.S. citizens, regardless of residence, must report PFICs on Form 8621 annually. The availability of a PFIC Annual Information Statement from VFV allows you to use the QEF election, reporting your share of the fund’s income each year rather than facing the default tax treatment.

Holding Canadian ETFs isn’t prohibited, but it triggers PFIC reporting requirements, which many U.S. taxpayers find burdensome. Selling VFV and buying a U.S.-listed ETF (e.g., VOO) eliminates future PFIC issues. However, past years without Form 8621 filings remain non-compliant unless addressed.

Options to Consider:

• Sell VFV, report the $50,000 gain on your Canadian and U.S. returns, and reinvest in a U.S. ETF to avoid future PFIC reporting.

• For past years, file late Form 8621s with QEF elections using VFV’s statements, or begin compliance with the current year if the risk seems low.

• Use a brokerage that allows purchases of U.S.-listed ETFs from Canada for future investments.

• Review your situation with a tax professional familiar with U.S./Canada tax rules to confirm requirements and address prior years.

Key Takeaways

The PFIC rules and Form 8621 apply to U.S. taxpayers with foreign mutual funds or ETFs, often requiring detailed reporting and tax calculations. Whether you’re new to U.S. tax residency, managing overseas investments, or a dual citizen, the steps forward include:

• Identifying which of your holdings are PFICs.

• Deciding how to report them (or reposition assets to avoid PFICs).

• Assessing past compliance and future strategies with a tax professional.

Each situation is unique, so professional guidance tailored to your circumstances is essential. If you have additional questions about PFICs or other tax matters, feel free to reach out—I’m happy to assist with resources or referrals.

As a Certified Public Accountant (CPA), I frequently assist clients with the complexities of U.S. tax rules, including those related to Passive Foreign Investment Companies (PFICs) and Form 8621. Recently, I’ve received questions from individuals navigating these rules for the first time—whether due to moving to the U.S., managing overseas investments, or handling dual citizenship. Below, I’ll address three specific scenarios to provide clarity on how PFIC rules apply, what options exist, and key considerations for compliance.

Scenario 1: First-Year U.S. Resident with Foreign ETFs

Question Recap: You moved to the U.S. in 2023 on a work visa and are filing your first tax return as a U.S. resident. You’ve discovered the PFIC rules and Form 8621 while preparing your return, particularly regarding ETFs held in your home country’s retirement accounts. You’re concerned about high tax rates, taxes on unrealized gains, and the cost of compliance. You’re also wondering if Form 8621 applies to you and why these rules target someone in your situation rather than others with larger offshore holdings.

Explanation: A PFIC is defined as a foreign corporation where at least 75% of its income is passive (e.g., dividends, interest) or 50% of its assets generate passive income. Many foreign ETFs and mutual funds, including those in retirement accounts, meet this definition. As a U.S. resident for tax purposes, you’re subject to U.S. tax rules on worldwide income, which includes reporting PFICs on Form 8621.

Form 8621 is required for each PFIC you own, directly or indirectly, unless an exception applies (e.g., total PFIC value under $25,000 for individuals, though this exemption has conditions). The default tax treatment taxes “excess distributions” (e.g., gains upon sale) at the highest ordinary income rate, plus interest on deferred tax. Alternatives like the Qualified Electing Fund (QEF) or mark-to-market elections may reduce the tax burden but require specific information from the fund and additional calculations.

The rules apply regardless of your intent or the size of your holdings because they’re designed to ensure U.S. taxpayers report foreign investments consistently. Foreign retirement accounts aren’t automatically exempt, as the IRS doesn’t recognize their tax-deferred status unless covered by a specific tax treaty.

Options to Consider:

• Confirm whether your ETFs are PFICs (check fund documentation or consult a tax professional).

• File Form 8621 for 2023 if applicable, choosing a tax method based on available data.

• Explore selling the ETFs and reinvesting in U.S.-based funds, noting any home country taxes or penalties.

• Work with a tax advisor to assess costs and compliance requirements specific to your situation.

Scenario 2: Starting PFIC Compliance Without Amending Past Returns

Question Recap: You hold overseas mutual funds and are addressing PFIC compliance. A CPA advised starting compliance with the current year’s return rather than amending past ones, suggesting the IRS may not actively enforce prior non-filing due to limited automated oversight. You’re seeking experiences from others who’ve taken this approach, insight into IRS enforcement, and tips for managing compliance.

Explanation: Form 8621 must be filed annually for each PFIC, even if no distributions occur, unless an exception applies. The IRS doesn’t currently issue automated notices for missing Form 8621s, unlike some other forms. Enforcement typically occurs during audits, often triggered by unrelated issues like unreported foreign accounts or significant income discrepancies. If Form 8621 was never filed, the statute of limitations may remain open for those tax years, allowing the IRS to assess penalties later.

Some taxpayers choose to begin filing Form 8621 in the current year without amending prior returns, particularly if past PFIC activity was minimal. Others opt to amend past returns or use programs like the Streamlined Filing Compliance Procedures to report prior omissions, depending on their risk level and exposure.

Options to Consider:

• Begin filing Form 8621 with your 2023 return, selecting a tax method (default, QEF, or mark-to-market) based on available fund data.

• Evaluate amending past returns if your PFIC holdings or distributions were significant, weighing the cost against potential audit risk.

• Shift future investments to U.S.-based funds to simplify reporting.

• Consult your tax advisor to determine the best approach for your specific circumstances and document your compliance efforts.

Scenario 3: Dual U.S./Canada Citizen with Canadian ETFs

Question Recap: As a dual U.S./Canada citizen living in Canada, you’ve invested in VFV (Vanguard Canada’s S&P 500 ETF), worth $200,000 with $50,000 in gains. You’ve learned VFV is a PFIC and provides a PFIC Annual Information Statement. You’re considering selling it, paying taxes on the gains, and buying U.S. ETFs instead. You’re asking if Canadian ETFs are problematic for U.S. citizens and whether selling resolves past non-compliance.

Explanation: VFV, as a Canadian-registered ETF, is classified as a PFIC under U.S. tax rules, even though it tracks a U.S. index like VOO. U.S. citizens, regardless of residence, must report PFICs on Form 8621 annually. The availability of a PFIC Annual Information Statement from VFV allows you to use the QEF election, reporting your share of the fund’s income each year rather than facing the default tax treatment.

Holding Canadian ETFs isn’t prohibited, but it triggers PFIC reporting requirements, which many U.S. taxpayers find burdensome. Selling VFV and buying a U.S.-listed ETF (e.g., VOO) eliminates future PFIC issues. However, past years without Form 8621 filings remain non-compliant unless addressed.

Options to Consider:

• Sell VFV, report the $50,000 gain on your Canadian and U.S. returns, and reinvest in a U.S. ETF to avoid future PFIC reporting.

• For past years, file late Form 8621s with QEF elections using VFV’s statements, or begin compliance with the current year if the risk seems low.

• Use a brokerage that allows purchases of U.S.-listed ETFs from Canada for future investments.

• Review your situation with a tax professional familiar with U.S./Canada tax rules to confirm requirements and address prior years.

Key Takeaways

The PFIC rules and Form 8621 apply to U.S. taxpayers with foreign mutual funds or ETFs, often requiring detailed reporting and tax calculations. Whether you’re new to U.S. tax residency, managing overseas investments, or a dual citizen, the steps forward include:

• Identifying which of your holdings are PFICs.

• Deciding how to report them (or reposition assets to avoid PFICs).

• Assessing past compliance and future strategies with a tax professional.

Each situation is unique, so professional guidance tailored to your circumstances is essential. If you have additional questions about PFICs or other tax matters, feel free to reach out—I’m happy to assist with resources or referrals.