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K-1s & Passive Foreign Investment Companies

K-1s

PFICs are a serious tax matter and should be given a great deal of consideration when reporting elections.

By Bethany Bouw

The IRS allows certain entities to use a pass-through taxation via Form K-1. Essentially, this moves the income tax liability from those earning the income to those who benefit from it. Many individuals receive Form K-1, due to their investments in flow-through entities like partnerships and S-Corporations. Those K-1 forms will include additional supplementary information behind the K-1 itself. This supplementary information is often where information on passive foreign investment companies (PFICs) is located. PFICs are a serious matter and require great consideration with reporting and elections.

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