Do you have investments in a Non-U.S. mutual fund(s) held through a foreign brokerage firm? Do NOT report funds held in retirement funds, insurance policies or annuity products.
This may be a difficult question to answer if you are just not sure what is a mutual fund (or a pooled investment fund).
Pooled investment funds – also known as collective investment schemes – are a way of putting sums of money from many people into a large fund spread across many investments and managed by professionals.
The reason we ask it is so that we can determine if you are required to report income from passive foreign companies PFIC - see this article for more detail.
Mutual funds sold during the tax year must be reported.
If you are not sure what is a mutual fund, please see Wikipedia article.
A PFIC is a non-U.S. corporation of which 75% or more of its gross income consists of passive income, or 50% or more of the average fair market value of its assets consists of assets that produce passive income.
Passive income includes, among other things, dividends, interest, rent, royalties and capital gains from the disposition of securities.
It is generally believed that virtually all foreign mutual funds and ETFs are PFICs.
This applies to any kind of mutual fund - listed or unlisted, private or public - any non-US mutual fund is PFIC.
In short - if you have money in a non-US financial account that is managed by someone else (ie they make investment decisions) - you have to answer YES to this question.
Lastly - please note -
Mutual funds held in a pension plan (meaning you can not have access to the funds until retirement) do not need to be reported on your tax return.
However, the balance in the foreign pension fund will be reported on FBAR without breakdown for investment type.