Note: The form, instructions, or publication you are looking for
begins after this coversheet.
Please review the updated information below.
Puerto Rico and American Samoa Information for Active Duty
Members of the U.S. Armed Forces and Certain Other U.S.
Government Employees Using Pub. 570
Active duty members of the U.S. Armed Forces whose state of legal residence is Puerto
Rico or American Samoa are U.S. Government employees. They are required to file both a
U.S. income tax return and a territory tax return, as applicable. Also, the reporting
requirements for U.S. Government employees who are not bona fide residents of American
Samoa have been clarified. A coversheet with this information is being added to 2014
through 2022 Pubs. 570. If you haven’t already filed a required U.S. tax return for those
years, you may have to file one now.
Puerto Rico
Active duty member of the U.S. Armed Forces. If you are an active duty member of the
U.S. Armed Forces whose state of legal residence is Puerto Rico, your military income is
Puerto Rico-source income. In this case, you will follow the tax rules for U.S. Government
employee wages under Special Rules for Puerto Rico in the attached Pub. 570, regardless
of where you are stationed. If you are an active duty member of the U.S. Armed Forces
whose state of legal residence is not Puerto Rico, the source of your military wages is
generally the same as your state of legal residence (that is, not sourced in Puerto Rico). In
that case, you will follow the tax rules for U.S. Government employee wages for your state
of legal residence, regardless of where you are stationed.
American Samoa
Active duty member of the U.S. Armed Forces. If you are an active duty member of the
U.S. Armed Forces whose state of legal residence is American Samoa, your military income
is American Samoa-source income. In this case, you will follow the tax rules for U.S.
Government employee wages in U.S. Government employees next, regardless of where
you are stationed. If you are an active duty member of the U.S. Armed Forces whose state
of legal residence is not American Samoa, the source of your military wages is generally the
same as your state of legal residence (that is, not sourced in American Samoa). In that
case, you will follow the tax rules for U.S. Government employee wages for your state of
legal residence, regardless of where you are stationed.
U.S. Government employees. U.S. Government wages, including for services performed
in American Samoa, must be included in U.S. gross income and reported on both your U.S.
and American Samoa income tax returns. Regardless of whether you are a bona fide
resident of American Samoa, you may have to file an income tax return with both the United
States and American Samoa.
• You must generally report all income on your U.S. income tax return, regardless of
source. Although a bona fide resident of American Samoa may generally exclude American
Samoa source income from their U.S. income tax return, pay from the U.S. Government for
services performed in American Samoa must be included on your U.S. income tax return
regardless of whether you are a bona fide resident of American Samoa. You can claim a
withholding credit on your U.S. income tax return for federal income taxes withheld from
your federal wages (as well as a foreign tax credit for income tax paid to American Samoa
on the same income).
• On your American Samoa income tax return, you must report all income from
American Samoa sources (and from all other sources if you are a bona fide resident of
American Samoa), including your wages from the U.S. Government for services performed
in American Samoa. For further information about your American Samoa income tax
obligations, contact the American Samoa Government Tax Office at Executive Office
Building, Pago Pago, AS 96799 (Phone: 684-633-4181).
Contents
What's New .................. 1
Reminders ................... 1
Introduction .................. 3
Chapter 1. Bona Fide Residence ..... 3
Chapter 2. Possession
Source Income ............. 7
Chapter 3. Filing Information for
Individuals in Certain U.S.
Possessions .............. 11
American Samoa ............ 11
The Commonwealth of Puerto
Rico ................. 13
The Commonwealth of the
Northern Mariana Islands ..... 15
Guam .................. 17
The U.S. Virgin Islands ........ 18
Chapter 4. Filing U.S. Tax Returns ... 20
Chapter 5. Illustrated Examples .... 25
Chapter 6. How To Get Tax Help .... 30
Index ..................... 33
Future Developments
For the latest information about developments
related to Pub. 570, such as legislation enacted
after it was published, go to IRS.gov/Pub570.
What's New
Coronavirus tax relief. Due to the global
health emergency caused by the coronavirus,
numerous forms of tax relief are now available.
If you have self-employment income and you
are required to pay self-employment tax, see
the 2020 Form 1040-SS and its instructions for
related changes. Additional provisions are dis-
cussed under the relevant topics throughout
this publication. Also, for more information, go
to IRS.gov/coronavirus-tax-relief-and-
economic-impact-payments.
Standard deduction amount. For 2020, the
standard deduction amount has increased for
all filers. See Standard deduction amount, later.
Maximum income subject to social security
tax. For 2020, the maximum amount of
self-employment income subject to social se-
curity tax is $137,700. The amount will increase
to $142,800 for 2021.
Optional methods to figure net earnings.
For 2020, the maximum income for using the
optional methods is $5,640. This amount will in-
crease to $5,880 for 2021.
Reminders
Disaster tax relief. To find information on the
most recent tax relief provisions for taxpayers
Department
of the
Treasury
Internal
Revenue
Service
Publication 570
Cat. No. 15118B
Tax Guide
for Individuals
With Income
From U.S.
Possessions
For use in preparing
2020 Returns
Get forms and other information faster and easier at:
• IRS.gov (English)
• IRS.gov/Spanish (Español)
•
IRS.gov/Chinese (中文)
•
IRS.gov/Korean (한국어)
• IRS.gov/Russian (Pусский)
• IRS.gov/Vietnamese (TiếngViệt)
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affected by disaster situations see Tax Relief in
Disaster Situations. See Pub. 547 for discus-
sions on the special rules that apply to federally
declared disaster areas.
Automatic 60-day extension. Certain tax-
payers affected by federally declared disasters
may be eligible for an automatic 60-day exten-
sion for filing returns, paying taxes, and per-
forming other tasks required by the IRS. For
more information, see Pub. 547.
Qualified opportunity zones (QOZs). The
Tax Cuts and Jobs Act (TCJA) amended the In-
ternal Revenue Code to encourage investments
in designated economically distressed com-
munities by providing income tax benefits to
taxpayers who invest new capital in businesses
located within QOZs. There are QOZs located
in the 50 states, the District of Columbia, Ameri-
can Samoa, the CNMI, Guam, Puerto Rico, and
the USVI.
Bona fide residents of the CNMI, Guam, and
the USVI will generally report qualifying invest-
ments on the income tax return they file with
their territory tax agency, while residents of
American Samoa and Puerto Rico will report
qualifying investments on their U.S. income tax
return. For additional information, see the QOZ
FAQs at IRS.gov/newsroom/opportunity-zones-
frequently-asked-questions. Taxpayers should
also consult with their territory tax agency for
additional information.
Taxpayer Advocate Service (TAS). TAS is
an independent organization within the IRS that
helps taxpayers and protects taxpayer rights.
The phone numbers for the local advocate for
the territories are:
•
American Samoa, the CNMI, and Guam:
808-566-2950 (in Hawaii);
•
Puerto Rico and the USVI: 787-522-8600
for Spanish, and 787-522-8601 for English
(in Puerto Rico).
For more information, see chapter 6.
Self-employment tax. Bona fide residents of
a U.S. territory who have self-employment in-
come must generally pay self-employment tax
to the United States. Self-employment tax in-
cludes both social security and Medicare. Bona
fide residents may be subject to U.S. self-em-
ployment tax even if they have no income tax fil-
ing obligation with the United States. See
Self-Employment Tax in chapter 4 for more in-
formation.
Additional child tax credit (ACTC). Bona
fide residents of Puerto Rico claiming the ACTC
should be aware of the following.
•
The maximum amount of the ACTC is
$1,400 per qualifying child.
•
Your qualifying child must have a social se-
curity number (SSN) valid for employment
issued prior to the due date of your 2020
return (including extensions), or you can’t
claim the ACTC on either your original or
an amended tax return.
Bona fide residents of territories other
than Puerto Rico may be able to claim
the ACTC on their territory income tax
return. For more information, contact your terri-
tory tax agency.
If you have a dependent who is not your
child, you may be able to claim the credit for
other dependents. The credit is a
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nonrefundable credit of up to $500 for each eli-
gible dependent who can't be claimed for the
child tax credit. Bona fide residents of Puerto
Rico calculate the ACTC and credit for other
dependents with the Additional Child Tax Credit
Worksheet in the Instructions for Form
1040-SS.
See the Instructions for Form 1040-SS for
more information.
If you are required to file Form 1040, see the
Instructions for Forms 1040 and 1040-SR for
more information about the ACTC and credit for
other dependents.
Additional Medicare Tax. You may be re-
quired to pay Additional Medicare Tax. Also,
you may need to report Additional Medicare
Tax withheld by your employer. For more infor-
mation, see Additional Medicare Tax under
Special Rules for Completing Your U.S. Tax
Return in chapter 4.
Net Investment Income Tax. The Net Invest-
ment Income Tax (NIIT) imposes a 3.8% tax on
the lesser of an individual's net investment in-
come or the excess of the individual's modified
adjusted gross income over a specified thresh-
old amount. Bona fide residents of Puerto Rico
and American Samoa who have a federal in-
come tax return filing obligation may be liable
for the NIIT if the taxpayer's modified adjusted
gross income from non-territory sources ex-
ceeds a specified threshold amount. Also, bona
fide residents must take into account any addi-
tional tax liability associated with the NIIT when
calculating their estimated tax payments.
The NIIT does not apply to any individual
who is a nonresident alien with respect to the
United States. For more information, see Net In-
vestment Income Tax under Bona Fide Resi-
dent of American Samoa and Bona Fide Resi-
dent of Puerto Rico in chapter 3.
Because bona fide residents of the CNMI,
Guam, and the U.S. Virgin Islands generally do
not have a federal income tax return filing obli-
gation, the NIIT generally does not directly ap-
ply to them. These residents should contact
their local territorial tax department for guidance
on the possible mirrored application of the NIIT
in these jurisdictions.
Individual taxpayer identification numbers
(ITINs) for aliens. If you are a nonresident or
resident alien and you do not have and are not
eligible to get a social security number (SSN),
you must apply for an ITIN. For details on how
to do so, see Form W-7 and the Instructions for
Form W-7. Allow 7 weeks for the IRS to notify
you of your ITIN application status (9 to 11
weeks if submitted during peak processing peri-
ods (January 15 through April 30) or if you are
filing from overseas). If you already have an
ITIN, enter it wherever your SSN is requested
on your tax return.
For more information, go to IRS.gov/ITIN.
An ITIN is for tax use only. It does not
entitle you to social security benefits or
change your employment or immigra-
tion status under U.S. law.
Expired ITIN. Generally, ITINs that have not
been used on a federal tax return at least once
in the last 3 consecutive years expired on De-
cember 31, 2020. ITINs with middle digits 88,
and those issued before 2013 with middle digits
CAUTION
!
90, 91, 92, 94, 95, 96, 97, 98, or 99 also expired
at the end of 2020. Affected taxpayers who ex-
pect to file a tax return in 2021 must submit a
renewal application. For more information on
how to renew an ITIN, go to IRS.gov/ITIN.
ITINs with middle digits 70 through 87
that expired in 2016, 2017, 2018, or
2019 can also be renewed.
Electronic filing. You can e-file Form
1040-SS and Form 1040-PR. For general infor-
mation about electronic filing, visit IRS.gov/
Efile.
Earned income credit (EIC). Generally, if you
are a bona fide resident of a U.S. territory, you
cannot claim the EIC on your U.S. tax return.
However, certain U.S. territories may allow
bona fide residents to claim the EIC on their ter-
ritory tax return.
To claim the EIC on your U.S. tax return,
your home (and your spouse's if filing a joint re-
turn) must have been in the United States for
more than half the year. If you have a child, the
child must have lived with you in the United
States for more than half the year. For this pur-
pose, the United States includes only the 50
states and the District of Columbia. Special
rules apply to military personnel stationed out-
side the United States. For more information on
this credit, see Pub. 596.
If you claim the earned income tax
credit (EITC) or the additional child tax
credit (ACTC) on your tax return, the
IRS must hold your refund until at least
mid-February—including the portion not associ-
ated with the EITC or ACTC. To track your re-
fund, go to IRS.gov/Refunds, or download the
IRS2Go mobile app.
Form 8938, Statement of Specified Foreign
Financial Assets. If you have specified foreign
financial assets in foreign jurisdictions valued
above certain threshold dollar amounts, you
may have to file Form 8938 when you file your
U.S. income tax return with the IRS.
Even if you are required to file Form 8938,
you may not have to report certain specified for-
eign financial assets on Form 8938. See Bona
fide resident of a U.S. possession in the Instruc-
tions for Form 8938 for more details.
Because bona fide residents of the
CNMI, Guam, and the USVI generally
do not have a U.S. federal income tax
return filing obligation, they generally are not re-
quired to file Form 8938 with the IRS. These
residents should contact their local territorial tax
department for guidance on the possible mir-
rored application of this reporting requirement
with these jurisdictions.
Change of address. If you change your mail-
ing address, use Form 8822 to notify the IRS
and U.S. territory tax administration, if appropri-
ate. Mail Form 8822 to the IRS Service Center
or U.S. territory tax administration address des-
ignated for your old address (see page 2 of
Form 8822).
If you change your address before filing your
tax return, write the new address in the appro-
priate boxes of your tax return when you file.
Reporting a change of bona fide residence.
If you became or cease to be a bona fide
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Page 2 Publication 570 (2020)
resident of a U.S. territory, you may need to file
Form 8898, Statement for Individuals Who Be-
gin or End Bona Fide Residence in a U.S. Pos-
session. For additional information, see Report-
ing a Change in Bona Fide Residence in
chapter 1.
Photographs of missing children. The IRS is
a proud partner with the National Center for
Missing & Exploited Children® (NCMEC). Pho-
tographs of missing children selected by the
Center may appear in this publication on pages
that would otherwise be blank. You can help
bring these children home by looking at the
photographs and calling 1-800-THE-LOST
(1-800-843-5678) if you recognize a child.
Introduction
This publication discusses how to treat income
received from the following U.S. territories on
your tax return(s).
•
American Samoa.
•
The Commonwealth of Puerto Rico (Puerto
Rico).
•
The Commonwealth of the Northern Ma-
riana Islands (CNMI).
•
Guam.
•
The U.S. Virgin Islands (USVI).
Unless stated otherwise, when the term
“possession” or “territory” is used in this publi-
cation, it includes the Commonwealths of Pu-
erto Rico and the Northern Mariana Islands.
Chapter 1 discusses the requirements for
being considered a bona fide resident of the lis-
ted territories.
Chapter 2 gives the rules for determining if
your income is from sources within, or effec-
tively connected with a trade or business in,
those territories.
Next, chapter 3 looks at the rules for filing
tax returns when you receive income from any
of these territories. You may have to file a U.S.
tax return only, a territory tax return only, or both
returns. Generally, this depends on whether
you are a bona fide resident of the territory. In
some cases, you may have to file a U.S. return,
but will be able to exclude income earned in a
territory from U.S. tax. You can find illustrated
examples of some of the additional forms re-
quired in chapter 5.
If you are not a bona fide resident of one of
the territories listed earlier, or are otherwise re-
quired to file a U.S. income tax return, the infor-
mation in chapter 4 will tell you how to file your
U.S. tax return. This information also applies if
you have income from U.S. insular areas other
than the five territories listed earlier because
that income will not qualify for any of the exclu-
sions or other benefits discussed in chapter 3.
These other U.S. insular areas include:
•
Baker Island,
•
Howland Island,
•
Jarvis Island,
•
Johnston Island,
•
Kingman Reef,
•
Midway Islands,
•
Palmyra Atoll, and
•
Wake Island.
Information for individuals living or
working in U.S. territories is available at
IRS.gov/Individuals/International-
Taxpayers/Individuals-Living-or-Working-in-US-
Possessions.
If you need information on U.S. taxa-
tion, write to:
Internal Revenue Service
International Section
Philadelphia, PA 19255-0725
If you need additional information on your
tax obligations in a U.S. territory, write to the tax
department of that territory. Their addresses are
provided in chapter 3 under the individual head-
ings for each territory.
Comments and suggestions. We welcome
your comments about this publication and your
suggestions for future editions.
You can send us comments through
IRS.gov/FormComments. Or, you can write to
the Internal Revenue Service, Tax Forms and
Publications, 1111 Constitution Ave. NW,
IR-6526, Washington, DC 20224.
Although we can’t respond individually to
each comment received, we do appreciate your
feedback and will consider your comments and
suggestions as we revise our tax forms, instruc-
tions, and publications. Do not send tax ques-
tions, tax returns, or payments to the above ad-
dress.
Getting answers to your tax questions.
If you have a tax question not answered by this
publication or the How To Get Tax Help section
at the end of this publication, go to the IRS In-
teractive Tax Assistant page at IRS.gov/
Help/ITA where you can find topics by using the
search feature or viewing the categories listed.
Getting tax forms, instructions, and pub-
lications. Visit IRS.gov/Forms to download
current and prior-year forms, instructions, and
publications.
Ordering tax forms, instructions, and
publications. Go to IRS.gov/OrderForms to
order current forms, instructions, and publica-
tions; call 800-829-3676 to order prior-year
forms and instructions. The IRS will process
your order for forms and publications as soon
as possible. Do not resubmit requests you’ve
already sent us. You can get forms and publica-
tions faster online.
To obtain tax forms required for your terri-
tory tax return, contact the tax office in your ter-
ritory. See chapter 3 for more information.
Useful Items
You may want to see:
Publication
3 Armed Forces' Tax Guide
54 Tax Guide for U.S. Citizens and
Resident Aliens Abroad
514 Foreign Tax Credit for Individuals
519 U.S. Tax Guide for Aliens
3
54
514
519
Form (and Instructions)
1040-PR Planilla para la Declaración de
la Contribución Federal sobre el
Trabajo por Cuenta Propia
(Incluyendo el Crédito Tributario
Adicional por Hijos para Residentes
Bona Fide de Puerto Rico)
1040-SS U.S. Self-Employment Tax
Return (Including the Additional Child
Tax Credit for Bona Fide Residents
of Puerto Rico)
1116 Foreign Tax Credit
4563 Exclusion of Income for Bona Fide
Residents of American Samoa
4868 Application for Automatic Extension
of Time To File U.S. Individual
Income Tax Return
5074 Allocation of Individual Income Tax
to Guam or the Commonwealth of the
Northern Mariana Islands (CNMI)
8938 Statement of Specified Foreign
Financial Assets
8689 Allocation of Individual Income Tax
to the U.S. Virgin Islands
8898 Statement for Individuals Who Begin
or End Bona Fide Residence in a
U.S. Possession
8959 Additional Medicare Tax
8960 Net Investment Income
Tax—Individuals, Estates, and Trusts
1.
Bona Fide
Residence
In order to qualify for certain tax benefits (see
chapter 3), you must be a bona fide resident of
American Samoa, the CNMI, Guam, Puerto
Rico, or the USVI for the tax year.
Generally, you are a bona fide resident of one
of these territories (the relevant territory) if, dur-
ing the tax year, you:
•
Meet the presence test,
•
Do not have a tax home outside the rele-
vant territory, and
•
Do not have a closer connection to the
United States or to a foreign country than
to the relevant territory.
Special rule for members of the U.S. Armed
Forces. If you are a member of the U.S. Armed
Forces who qualified as a bona fide resident of
the relevant territory in an earlier tax year, your
absence from that territory during the current
tax year in compliance with military orders will
not affect your status as a bona fide resident.
Likewise, being in a territory solely in compli-
ance with military orders will not qualify you for
1040-PR
1040-SS
1116
4563
4868
5074
8938
8689
8898
8959
8960
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Chapter 1 Bona Fide Residence Page 3
bona fide residency. Also see the special in-
come source rule for members of the U.S.
Armed Forces in chapter 2, under Compensa-
tion for Labor or Personal Services.
Special rule for civilian spouse of active
duty member of the U.S. Armed Forces. If
you are the civilian spouse of an active duty
service member, under Military Spouses Resi-
dency Relief Act (MSRRA) you can choose to
keep your prior residence or domicile for tax
purposes (tax residence) when accompanying
the service member spouse, who is relocating
under military orders, to a new military duty sta-
tion in one of the 50 states, the District of Co-
lumbia, or a U.S. territory. Before relocating,
you and your spouse must have the same tax
residence.
If you are a civilian spouse and choose to
keep your prior tax residence after such reloca-
tion, the source of income for services per-
formed (for example, wages, salaries, tips, or
self-employment) by you is considered to be
(the jurisdiction of) the prior tax residence. As a
result, the amount of income tax withholding
(from Form(s) W-2) that you are able to claim
on your federal return, as well as the need to file
a state or U.S. territory return, may be affected.
The spouse of the service member
may elect to use the same residence
for tax purposes as the service mem-
ber regardless of the date on which the mar-
riage of the spouse and service member occur-
red.
For more information, see the following.
•
Notice 2010-30, available at IRS.gov/irb/
2010-18_IRB#NOT-2010-30.
•
Notice 2011-16, available at IRS.gov/irb/
2011-17_IRB#NOT-2011-16.
•
Notice 2012-41, available at IRS.gov/irb/
2012-26_IRB#NOT-2012-41.
Also, you can consult with state, local, or
U.S. territory tax authorities regarding your tax
obligations under MSRRA.
Presence Test
If you are a U.S. citizen or resident alien, you
will satisfy the presence test for the tax year if
you meet one of the following conditions.
1. You were present in the relevant territory
for at least 183 days during the tax year.
2. You were present in the relevant territory
for at least 549 days during the 3-year pe-
riod that includes the current tax year and
the 2 immediately preceding tax years.
During each year of the 3-year period, you
must be present in the relevant territory for
at least 60 days.
3. You were present in the United States for
no more than 90 days during the tax year.
4. You had earned income in the United
States of no more than a total of $3,000
and were present for more days in the rel-
evant territory than in the United States
during the tax year. Earned income is pay
for personal services performed, such as
wages, salaries, or professional fees.
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5. You had no significant connection to the
United States during the tax year.
Special rule for nonresident aliens. Condi-
tions (1) through (5) above do not apply to non-
resident aliens of the United States. Instead,
nonresident aliens must meet the substantial
presence test discussed in chapter 1 of Pub.
519. In that discussion, substitute the name of
the territory for “United States” and “U.S.” wher-
ever they appear. Disregard the discussion in
that chapter about a Closer Connection to a
Foreign Country.
Days of Presence in the
United States or Relevant
Territory
Generally, you are treated as being present in
the United States or in the relevant territory on
any day that you are physically present in that
location at any time during the day.
Days of presence in a territory. You are con-
sidered to be present in the relevant territory on
any of the following days.
1. Any day you are physically present in that
territory at any time during the day.
2. Any day you are outside of the relevant
territory in order to receive, or to accom-
pany any of the following family members
to receive, qualifying medical treatment
(see Qualifying Medical Treatment, later).
a. Your parent.
b. Your spouse.
c. Your child, who is your son, daughter,
stepson, or stepdaughter. This in-
cludes an adopted child or child law-
fully placed with you for legal adop-
tion. This also includes a foster child
who is placed with you by an author-
ized placement agency or by judg-
ment, decree, or other order of any
court of competent jurisdiction.
3. Any day you are outside the relevant terri-
tory because you leave or are unable to
return to the relevant territory during any:
a. 14-day period within which a major
disaster occurs in the relevant territory
for which a Federal Emergency Man-
agement Agency (FEMA) notice of a
federal declaration of a major disaster
is issued in the Federal Register, or
b. Period for which a mandatory evacua-
tion order is in effect for the geo-
graphic area in the relevant territory in
which your main home is located.
4. Any day (up to a total of 30 days) that you
are outside the relevant territory and the
United States for business or personal
travel, but this rule:
a. Applies only if the number of days you
are considered present in the relevant
territory exceeds the number of days
you are considered present in the Uni-
ted States (determined without regard
to the rule in this section (4)), and
b. Does not apply for purposes of calcu-
lating the minimum 60 days of pres-
ence in the relevant territory that is re-
quired for the 549-day presence test
(see Presence Test, earlier).
If, during a single day, you are physically
present:
•
In the United States and in the relevant ter-
ritory, that day is considered a day of pres-
ence in the relevant territory; or
•
In two territories, that day is considered a
day of presence in the territory where your
tax home is located (see Tax Home, later).
Days of presence in the United States. You
are considered to be present in the United
States on any day that you are physically
present in the United States at any time during
the day. However, do not count the following
days as days of presence in the United States.
1. Any day you are temporarily present in the
United States in order to receive, or to ac-
company a parent, spouse, or child who is
receiving, qualifying medical treatment.
Child is defined in item 2c under Days of
presence in a territory, earlier. Qualifying
medical treatment is defined later.
2. Any day you are temporarily present in the
United States because you leave or are
unable to return to the relevant territory
during any:
a. 14-day period within which a major
disaster occurs in the relevant territory
for which a Federal Emergency Man-
agement Agency (FEMA) notice of a
federal declaration of a major disaster
is issued in the Federal Register, or
b. Period for which a mandatory evacua-
tion order is in effect for the geo-
graphic area in the relevant territory in
which your main home is located.
3. Any day you are in the United States for
less than 24 hours when you are traveling
between two places outside the United
States.
4. Any day you are temporarily present in the
United States as a professional athlete to
compete in a charitable sports event (de-
fined later).
5. Any day you are temporarily in the United
States as a student (defined later).
6. Any day you are in the United States serv-
ing as an elected representative of the rel-
evant territory, or serving full time as an
elected or appointed official or employee
of the government of that territory (or any
of its political subdivisions).
Qualifying Medical Treatment
Such treatment is generally provided by (or un-
der the supervision of) a physician for an ill-
ness, injury, impairment, or physical or mental
condition. The treatment generally involves:
•
Any period of inpatient care that requires
an overnight stay in a hospital or hospice,
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Page 4 Chapter 1 Bona Fide Residence
and any period immediately before or after
that inpatient care to the extent it is medi-
cally necessary; or
•
Any temporary period of inpatient care in a
residential medical care facility for medi-
cally necessary rehabilitation services.
With respect to each qualifying medical
treatment, you must prepare (or obtain) and
maintain documentation supporting your claim
that such treatment meets the criteria to be con-
sidered days of presence in the relevant pos-
session. You must be able to produce this doc-
umentation within 30 days if requested by the
IRS or tax administrator for the relevant posses-
sion.
You must keep the following documentation.
1. Records that provide:
a. The patient's name and relationship to
you (if the medical treatment is provi-
ded to a person you accompany);
b. The name and address of the hospi-
tal, hospice, or residential medical
care facility where the medical treat-
ment was provided;
c. The name, address, and telephone
number of the physician who provided
the medical treatment;
d. The date(s) on which the medical
treatment was provided; and
e. Receipt(s) of payment for the medical
treatment.
2. Signed certification by the providing or su-
pervising physician that the medical treat-
ment met the requirements for being quali-
fied medical treatment, and setting forth:
a. The patient's name,
b. A reasonably detailed description of
the medical treatment provided by (or
under the supervision of) the physi-
cian,
c. The dates on which the medical treat-
ment was provided, and
d. The medical facts that support the
physician's certification and determi-
nation that the treatment was medi-
cally necessary.
Charitable Sports Event
A charitable sports event is one that meets all of
the following conditions.
•
The main purpose is to benefit a qualified
charitable organization.
•
The entire net proceeds go to charity.
•
Volunteers perform substantially all the
work.
In figuring the days of presence in the Uni-
ted States, you can exclude only the days on
which you actually competed in the charitable
sports event. You cannot exclude the days on
which you were in the United States to practice
for the event, to perform promotional or other
activities related to the event, or to travel be-
tween events.
Student
To qualify as a student, you must be, during
some part of each of any 5 calendar months
during the calendar year:
1. A full-time student at a school that has a
regular teaching staff, course of study, and
regularly enrolled body of students in at-
tendance; or
2. A student taking a full-time, on-farm train-
ing course given by a school described in
(1) above or by a state, county, or local
government agency.
The 5 calendar months do not have to be
consecutive.
Full-time student. A full-time student is a per-
son who is enrolled for the number of hours or
courses the school considers to be full-time at-
tendance. However, school attendance exclu-
sively at night is not considered full-time attend-
ance.
School. The term “school” includes elementary
schools, middle schools, junior and senior high
schools, colleges, universities, and technical,
trade, and mechanical schools. It does not in-
clude on-the-job training courses, correspond-
ence schools, and schools offering courses
only through the Internet.
Significant Connection
One way in which you can meet the presence
test is to have no significant connection to the
United States during the tax year. This section
looks at the factors that determine if a signifi-
cant connection exists.
You are treated as having a significant con-
nection to the United States if you:
1. Have a permanent home in the United
States;
2. Are currently registered to vote in any po-
litical subdivision of the United States; or
3. Have a spouse or child (see item 2c under
Days of presence in a territory, earlier)
who is under age 18 whose main home is
in the United States, other than:
a. A child who is in the United States be-
cause he or she is the child of di-
vorced or legally separated parents
and is living with a custodial parent
under a custodial decree or multiple
support agreement, or
b. A child who is in the United States as
a student.
For the purpose of determining if you have a
significant connection to the United States, the
term “spouse” does not include a spouse from
whom you are legally separated under a decree
of divorce or separate maintenance.
Permanent home. A permanent home gener-
ally includes an accommodation such as a
house, an apartment, or a furnished room that is
either owned or rented by you or your spouse.
The dwelling unit must be available at all times,
continuously, not only for short stays.
Exception for rental property. If you or
your spouse own the dwelling unit and at any
time during the tax year it is rented to someone
else at fair rental value, it will be considered
your permanent home only if you or your
spouse use that property for personal purposes
for more than the greater of:
•
14 days, or
•
10% of the number of days during that tax
year that the property is rented to others at
a fair rental value.
You are treated as using rental property for
personal purposes on any day the property is
not being rented to someone else at fair rental
value for the entire day.
A day of personal use of a dwelling unit is
also any day that the unit is used by any of the
following persons.
•
You or any other person who has an inter-
est in it, unless you rent it to another owner
as his or her main home under a shared
equity financing agreement.
•
A member of your family or a member of
the family of any other person who has an
interest in it, unless the family member
uses the dwelling unit as his or her main
home and pays a fair rental price. Family
includes only brothers and sisters,
half-brothers and half-sisters, spouses, an-
cestors (parents, grandparents, etc.), and
lineal descendants (children, grandchil-
dren, etc.).
•
Anyone under an arrangement that lets
you use some other dwelling unit.
•
Anyone at less than a fair rental price.
However, any day you spend working sub-
stantially full time repairing and maintaining (not
improving) your property is not counted as a
day of personal use. Whether your property is
used mainly for this purpose is determined in
light of all the facts and circumstances, such as:
•
The amount of time you devote to repair
and maintenance work,
•
How often during the tax year you perform
repair and maintenance work on this prop-
erty, and
•
The presence and activities of compan-
ions.
See Pub. 527 for more information about
personal use of a dwelling unit.
Example—no significant U.S. connec-
tion. Ann Green, a U.S. citizen, is a sales rep-
resentative for a company based in Guam. Ann
lives with her spouse and young children in their
house in Guam, where she is also registered to
vote. Her business travel requires her to spend
120 days in the United States and another 120
days in foreign countries. When traveling on
business, Ann generally stays at hotels but
sometimes stays with her brother, who lives in
the United States. Ann's stays are always of
short duration and she asks her brother's per-
mission to stay with him. Her brother's house is
not her permanent home, nor does she have
any other accommodations in the United States
that would be considered her permanent home.
Ann satisfies the presence test because she
has no significant connection to the United
States.
Example—significant U.S. connection
but presence test met. Eric and Wanda
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Chapter 1 Bona Fide Residence Page 5
Brown live for part of the year in a condomin-
ium, which they own, in the CNMI. They also
own a house in Maine where they live for 120
days every year to be near their grown children
and grandchildren. The Browns are retired and
their only income is from pension payments,
dividends, interest, and social security benefits.
In 2020, Eric and Wanda spent only 160
days in the CNMI because of an 85-day vaca-
tion to Europe and Asia and 120 days in the
United States. Although the Browns were
present in the United States for more than 90
days and had a significant connection to the
United States because of their permanent home
there, they satisfied the presence test with re-
spect to the CNMI because they had no earned
income in the United States and were consid-
ered physically present in the CNMI for at least
183 days (160 days plus 30 days deemed
present during their 85-day vacation to Europe
and Asia for a total of 190 days).
Tax Home
You will have met the tax home test if you did
not have a tax home outside the relevant pos-
session during any part of the tax year. Your tax
home is generally determined under the princi-
ples of section 911(d)(3) and section 162(a)(2)
(relating to traveling expenses while away from
home).
Your tax home is your regular or main place
of business, employment, or post of duty re-
gardless of where you maintain your family
home. If you do not have a regular or main
place of business because of the nature of your
work, then your tax home is the place where
you regularly live. If you do not fit either of these
categories, you are considered an itinerant and
your tax home is wherever you work.
Exceptions
There are some special rules regarding tax
home that provide exceptions to the general
rule stated above.
Students and Government
Officials
Disregard the following days when determining
whether you have a tax home outside the rele-
vant territory.
•
Days you were temporarily in the United
States as a student (see Student under
Days of Presence in the United States or
Relevant Territory, earlier).
•
Days you were in the United States serving
as an elected representative of the rele-
vant territory, or serving full time as an
elected or appointed official or employee
of the government of that territory (or any
of its political subdivisions).
Seafarers
You will not be considered to have a tax home
outside the relevant territory solely because you
are employed on a ship or other seafaring ves-
sel that is predominantly used in local and inter-
national waters. For this purpose, a vessel is
considered to be predominantly used in local
and international waters if, during the tax year,
the total amount of time it is used in interna-
tional waters and in the waters within 3 miles of
the relevant territory exceeds the total amount
of time it is used in the territorial waters of the
United States, another territory, or any foreign
country.
Example. In 2020, Sean Silverman, a U.S.
citizen, was employed by a fishery and spent
250 days at sea on a fishing vessel. When not
at sea, Sean lived with his spouse at a house
they own in American Samoa. The fishing ves-
sel on which Sean works departs and arrives at
various ports in American Samoa, other territo-
ries, and foreign countries, but was in interna-
tional or American Samoa's local waters for 225
days. For purposes of determining bona fide
residency of American Samoa, Sean will not be
considered to have a tax home outside that ter-
ritory solely because of his employment on
board the fishing vessel.
Year of Move
If you are moving to or from a territory during
the year, you may still be able to meet the tax
home test for that year. See Special Rules in
the Year of a Move, later, in this chapter.
Closer Connection
You will have met the closer connection test if,
during any part of the tax year, you do not have
a closer connection to the United States or a
foreign country than to the relevant U.S. terri-
tory.
You will be considered to have a closer con-
nection to a territory than to the United States or
to a foreign country if you have maintained
more significant contacts with the territories
than with the United States or foreign country.
In determining if you have maintained more sig-
nificant contacts with the relevant territory, the
facts and circumstances to be considered in-
clude, but are not limited to, the following.
•
The location of your permanent home.
•
The location of your family.
•
The location of personal belongings, such
as automobiles, furniture, clothing, and
jewelry owned by you and your family.
•
The location of social, political, cultural,
professional, or religious organizations
with which you have a current relationship.
•
The location where you conduct your rou-
tine personal banking activities.
•
The location where you conduct business
activities (other than those that go into de-
termining your tax home).
•
The location of the jurisdiction in which you
hold a driver's license.
•
The location of the jurisdiction in which you
vote.
•
The location of charitable organizations to
which you contribute.
•
The country of residence you designate on
forms and documents.
•
The types of official forms and documents
you file, such as Form W-8BEN or Form
W-9.
Your connections to the relevant territory will
be compared to the total of your connections
with the United States and foreign countries.
Your answers to the questions on Form 8898,
Part III, will help establish the jurisdiction to
which you have a closer connection.
Example—closer connection to the Uni-
ted States. Marcos Reyes, a U.S. citizen,
moved to Puerto Rico in 2020 to start an invest-
ment consulting and venture capital business.
His spouse and two teenage children remained
in California to allow the children to complete
high school. He traveled back to the United
States regularly to see his spouse and children,
to engage in business activities, and to take va-
cations. Marcos had an apartment available for
his full-time use in Puerto Rico, but remained a
joint owner of the residence in California where
his spouse and children lived. Marcos and his
family had automobiles and personal belong-
ings such as furniture, clothing, and jewelry lo-
cated at both residences. Although Marcos was
a member of the Puerto Rico Chamber of Com-
merce, he also belonged to and had current re-
lationships with social, political, cultural, and re-
ligious organizations in California. Marcos
received mail in California, including bank and
brokerage statements and credit card bills. He
conducted his personal banking activities in
California. He held a California driver's license
and was also registered to vote there. Based on
all of the particular facts and circumstances per-
taining to Marcos, he was not a bona fide resi-
dent of Puerto Rico in 2020 because he had a
closer connection to the United States than to
Puerto Rico.
Closer connection to another territory.
Generally, territories are not treated as foreign
countries. Therefore, a closer connection to a
territory other than the relevant territory will not
be treated as a closer connection to a foreign
country.
Example—tax home and closer connec-
tion to territory. Pearl Blackmon, a U.S. citi-
zen, is a permanent employee of a hotel in
Guam, but works only during the tourist season.
For the remainder of each year, Pearl lives with
her spouse and children in the CNMI, where
she has no outside employment. Most of Pearl's
personal belongings, including her automobile,
are located in the CNMI. She is registered to
vote in, and has a driver's license issued by, the
CNMI. She does her personal banking in the
CNMI and routinely lists her CNMI address as
her permanent address on forms and docu-
ments. Pearl satisfies the presence test with re-
spect to both Guam and the CNMI. She satis-
fies the tax home test with respect to Guam,
because her regular place of business is in
Guam. Pearl satisfies the closer connection test
with respect to both Guam and the CNMI be-
cause she does not have a closer connection to
the United States or to any foreign country.
Pearl is considered a bona fide resident of
Guam, the location of her tax home.
Exception for Year of Move
If you are moving to or from a territory during
the year, you may still be able to meet the
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Page 6 Chapter 1 Bona Fide Residence
closer connection test for that year. See Special
Rules in the Year of a Move next.
Special Rules in the Year
of a Move
If you are moving to or from a territory during
the year, you may still be able to meet the tax
home and closer connection tests for that year.
Year of Moving to a Territory
You will satisfy the tax home and closer con-
nection tests in the tax year of changing your
residence to the relevant territory if you meet all
of the following.
•
You have not been a bona fide resident of
the relevant territory in any of the 3 tax
years immediately preceding your move.
•
In the year of the move, you do not have a
tax home outside the relevant territory or a
closer connection to the United States or a
foreign country than to the relevant territory
during any of the last 183 days of the tax
year.
•
You are a bona fide resident of the relevant
territory for each of the 3 tax years immedi-
ately following your move.
Example. Dwight Wood, a U.S. citizen, files
returns on a calendar year basis. He lived in the
United States from January 2014 through May
2020. In June 2020, he moved to the USVI, pur-
chased a house, and accepted a permanent job
with a local employer. From July 1 through De-
cember 31, 2020 (more than 183 days),
Dwight's principal place of business was in the
USVI and, during that time, he did not have a
closer connection to the United States or a for-
eign country than to the USVI.
If he is a bona fide resident of the USVI dur-
ing all of 2021 through 2022, he will satisfy the
tax home and closer connection tests for 2020.
If Dwight also satisfies the presence test in
2020, he will be considered a bona fide resident
of the USVI for the 2020 tax year.
Year of Moving From a
Territory
In the year you cease to be a bona fide resident
of American Samoa, the CNMI, Guam, or the
USVI, you will satisfy the tax home and closer
connection tests with respect to the relevant ter-
ritory if you meet all of the following.
•
You have been a bona fide resident of the
relevant territory for each of the 3 tax years
immediately preceding your change of res-
idence.
•
In the year of the move, you do not have a
tax home outside the relevant territory or a
closer connection to the United States or a
foreign country than to the relevant territory
during any of the first 183 days of the tax
year.
•
You are not a bona fide resident of the rel-
evant territory for any of the 3 tax years im-
mediately following your move.
Example. Jean Aspen, a U.S. citizen, files
returns on a calendar year basis. From January
2017 through December 2019, Jean was a
bona fide resident of American Samoa. Jean
continued to live there until September 6, 2020,
when she accepted new employment and
moved to Hawaii. Jean's principal place of busi-
ness from January 1 through September 5,
2020 (more than 183 days), was in American
Samoa, and during that period Jean did not
have a closer connection to the United States or
a foreign country than to American Samoa. If
Jean continues to live and work in Hawaii for
the rest of 2020 and throughout years 2021
through 2023, she will satisfy the tax home and
closer connection tests for 2020 with respect to
American Samoa. If Jean also satisfies the
presence test in 2020, she will be considered a
bona fide resident for the 2020 tax year.
Puerto Rico
You will be considered a bona fide resident of
Puerto Rico for the part of the tax year preced-
ing the date on which you move if you:
•
Are a U.S. citizen,
•
Are a bona fide resident of Puerto Rico for
at least 2 tax years immediately preceding
the tax year of the move,
•
Cease to be a bona fide resident of Puerto
Rico during the tax year,
•
Cease to have a tax home in Puerto Rico
during the tax year, and
•
Have a closer connection to Puerto Rico
than to the United States or a foreign coun-
try throughout the part of the tax year pre-
ceding the date on which you cease to
have a tax home in Puerto Rico.
Example. Randy White, a U.S. citizen, files
returns on a calendar year basis. For all of 2018
and 2019, Randy was a bona fide resident of
Puerto Rico. From January through April 2020,
Randy continued to reside and maintain his
principal place of business in and closer con-
nection to Puerto Rico. On May 5, 2020, Randy
moved and changed his tax home to Nevada.
Later that year, he established a closer connec-
tion to the United States than to Puerto Rico.
Randy did not satisfy the presence test for 2020
with respect to Puerto Rico, nor the tax home or
closer connection tests. However, because
Randy was a bona fide resident of Puerto Rico
for at least 2 tax years before he moved to Ne-
vada in 2020, he was a bona fide resident of
Puerto Rico from January 1 through May 4,
2020.
Reporting a Change in
Bona Fide Residence
If you became or ceased to be a bona fide resi-
dent of a U.S. territory, you may need to file
Form 8898. This applies to the U.S. territories of
American Samoa, the CNMI, Guam, Puerto
Rico, and the USVI.
Who Must File
You must file Form 8898 for the tax year in
which you meet both of the following conditions.
1. Your worldwide gross income (defined be-
low) in that tax year is more than $75,000.
2. You meet one of the following.
a. You take a position for U.S. tax purpo-
ses that you became a bona fide resi-
dent of a U.S. territory after a tax year
for which you filed a U.S. income tax
return as a citizen or resident alien of
the United States but not as a bona
fide resident of the territory.
b. You are a citizen or resident alien of
the United States who takes the posi-
tion for U.S. tax purposes that you
ceased to be a bona fide resident of a
U.S. territory after a tax year for which
you filed an income tax return (with
the IRS, the territory tax authority, or
both) as a bona fide resident of the
territory.
c. You take the position for U.S. tax pur-
poses that you became a bona fide
resident of Puerto Rico or American
Samoa after a tax year for which you
were required to file an income tax re-
turn as a bona fide resident of the
CNMI, Guam, or the USVI.
Worldwide gross income. Worldwide gross
income means all income you received in the
form of money, goods, property, and services,
including any income from sources outside the
United States (even if you can exclude part or
all of it) and before any deductions, credits, or
rebates.
Example. You are a U.S. citizen who
moved to the CNMI in December 2019, but did
not become a bona fide resident of that territory
until the 2020 tax year. You must file Form 8898
for the 2020 tax year if your worldwide gross in-
come for that year was more than $75,000.
Penalty for Not Filing
Form 8898
If you are required to file Form 8898 for any tax
year and you fail to file it, you may owe a pen-
alty of $1,000. Also, you may owe this penalty if
you do not include all the information required
by the form or the form includes incorrect infor-
mation. In either case, you will not owe this pen-
alty if you can show that such failure is due to
reasonable cause and not willful neglect. This is
in addition to any criminal penalty that may be
imposed.
2.
Possession
Source Income
In order to determine where to file your return
and which form(s) you need to complete, you
may need to determine the source of each item
of income you received during the tax year.
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Chapter 2 Possession Source Income Page 7
This chapter discusses the rules for determining
if the source of your income is from:
•
American Samoa,
•
The Commonwealth of the Northern Ma-
riana Islands,
•
The Commonwealth of Puerto Rico (Puerto
Rico),
•
Guam, or
•
The U.S. Virgin Islands.
Generally, the same rules that apply for deter-
mining U.S. source income also apply for deter-
mining territory source income. However, there
are some important exceptions to these rules.
Both the general rules and the exceptions are
discussed in this chapter.
U.S. income rule. This rule states that income
is not territory source income if, under the rules
of Internal Revenue Code sections 861–865, it
is treated as income:
•
From sources within the United States, or
•
Effectively connected with the conduct of a
trade or business within the United States.
Table 2-1 shows the general rules for deter-
mining whether income is from sources within
the United States.
Types of Income
This section looks at the most common types of
income received by individuals, and the rules
for determining the source of the income. Gen-
erally, the same rules shown in Table 2-1 are
used to determine if you have territory source
income.
Compensation for Labor or
Personal Services
Income from labor or personal services includes
wages, salaries, commissions, fees, per diem
allowances, employee allowances and bo-
nuses, and fringe benefits. It also includes in-
come earned by sole proprietors and general
partners from providing personal services in the
course of their trades or businesses.
Services performed wholly within a relevant
territory. Generally, all pay you receive for
services performed in a relevant territory is con-
sidered to be from sources within that territory.
However, there are exceptions to this rule as
discussed further below.
U.S. Armed Forces. If you are a bona fide
resident of a relevant territory, your military
service pay on active duty will be sourced in
that territory even if you perform the services in
the United States or another territory. However,
if you are not a bona fide resident of a territory,
your military service pay will be income from the
United States even if you perform services in a
territory.
Civilian spouse of active duty member
of the U.S. Armed Forces. If you are a bona
fide resident of a U.S. territory and choose to
keep that territory as your tax residence under
MSRRA when relocating with your service
member spouse under military orders, the
source of income for your labor or personal
services is considered to be that territory.
Likewise, if your tax residence is in one of the
50 states or the District of Columbia before relo-
cating and you choose to keep it as your tax
residence, the source of income for services
performed in any of the U.S. territories is con-
sidered to be the United States and, specifi-
cally, your state of residence or the District of
Columbia.
For more information, see the following.
•
Notice 2010-30, available at IRS.gov/irb/
2010-18_IRB#NOT-2010-30.
•
Notice 2011-16, available at IRS.gov/irb/
2011-17_IRB#NOT-2011-16.
•
Notice 2012-41, available at IRS.gov/irb/
2012-26_IRB#NOT-2012-41.
Also, you can consult with state, local, or
U.S. territory tax authorities regarding your tax
obligations under MSRRA.
De minimis exception. There is an exception
to the rule for determining the source of income
earned in a territory. Generally, you will not
have income from a territory if during a tax year
you:
•
Are a U.S. citizen or resident;
•
Are not a bona fide resident of that terri-
tory;
•
Are not employed by or under contract with
an individual, partnership, or corporation
that is engaged in a trade or business in
that territory;
•
Temporarily perform services in that terri-
tory for 90 days or less; and
•
Earned $3,000 or less from such services.
Services performed partly inside and partly
outside a relevant territory. If you are an em-
ployee and receive compensation for labor or
personal services performed both inside and
outside the relevant territory, special rules apply
in determining the source of the compensation.
Compensation (other than certain fringe bene-
fits) is sourced on a time basis. Certain fringe
benefits (such as housing and education) are
sourced on a geographical basis.
Or you may be permitted to use an alterna-
tive basis to determine the source of compen-
sation. See Alternative basis, later.
If you are self-employed, determine the
source of your income for labor or personal
services from self-employment on the basis that
most correctly reflects the proper source of that
income under the facts and circumstances of
your particular case. In many cases, the facts
and circumstances will call for an apportion-
ment on a time basis as explained next.
Time basis. Use a time basis to figure your
compensation for labor or personal services
from the relevant territory (other than the fringe
benefits discussed later). Do this by multiplying
your total compensation (other than the fringe
benefits discussed later) by the following frac-
tion:
Number of days you performed
services in the relevant
territory during the year
Total number of days you
performed services during the year
You can use a unit of time less than a day in
the above fraction, if appropriate. The time pe-
riod for which the income is made does not
have to be a year. Instead, you can use another
distinct, separate, and continuous time period if
you can establish to the satisfaction of the IRS
that this other period is more appropriate.
General Rules for Determining U.S. Source of Income
Item of Income Factor Determining Source
Salaries, wages, and other compensation
for labor or personal services
Where labor or services performed
Note. See Compensation for Labor or Personal
Services, later.
Pensions Contributions: Where services were performed
that earned the pension
Investment earnings: Where pension trust is
located
Interest Residence of payer
Dividends Where corporation created or organized
Rents Location of property
Royalties:
Natural resources Location of property
Patents, copyrights, etc. Where property is used
Sale of business inventory—purchased Where sold
Sale of business inventory—produced Where sold unless sold within the Unites States.
Allocation if purchased in U.S. territory and sold
within the United States.
Sale of real property Location of property
Sale of personal property Seller's tax home (but see Special Rules for Gains
From Dispositions of Certain Property, later, for
exceptions)
Sale of natural resources Allocation based on fair market value of product at
export terminal. For more information, see
Regulations section 1.863-1(b).
Table 2-1.
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Page 8 Chapter 2 Possession Source Income
Example. In 2020, you worked in your em-
ployer's office in the United States for 60 days
and in the Puerto Rico office for 180 days, earn-
ing a total of $80,000 for the year. Your Puerto
Rico source income is $60,000, figured as fol-
lows.
180 days
240 days
× $80,000 = $60,000
Multi-year compensation. The source of
multi-year compensation is generally deter-
mined on a time basis over the period to which
the compensation is attributable. Multi-year
compensation is compensation that is included
in your income in 1 tax year but is attributable to
a period that includes 2 or more tax years. You
determine the period to which the income is at-
tributable based on the facts and circumstances
of your case. For more information on
multi-year compensation, see Regulations sec-
tion 1.861-4(b).
Certain fringe benefits sourced on a
geographical basis. If you received any of the
following fringe benefits as compensation for la-
bor or services performed as an employee
partly inside and partly outside a relevant pos-
session, you must source that income on a geo-
graphical basis.
•
Housing.
•
Education.
•
Local transportation.
•
Tax reimbursement.
•
Hazardous or hardship duty pay.
•
Moving expense reimbursement.
For information on determining the source of
the fringe benefits listed above, see Regula-
tions section 1.861-4(b).
Alternative basis. You can determine the
source of your compensation under an alterna-
tive basis if you establish to the satisfaction of
the IRS that, under the facts and circumstances
of your case, the alternative basis more prop-
erly determines the source of your income than
the time or geographical basis. If you use an al-
ternative basis, you must keep (and have avail-
able for inspection) records to document why
the alternative basis more properly determines
the source of your income.
Pensions. Generally, pension income has two
components: contributions to the pension plan
and the earnings accrued from investing those
contributions. The contribution portion is
sourced according to where services were per-
formed that earned the pension. The invest-
ment earnings portion is sourced according to
the location of the pension trust making the dis-
tributions.
Example. You are a U.S. citizen who
worked in Puerto Rico for a U.S. company. All
services were performed in Puerto Rico. Upon
retirement, you remained in Puerto Rico and
began receiving your pension from the U.S.
pension trust of your employer. Distributions
from the U.S. pension trust must be allocated
between (1) contributions, which are Puerto
Rico source income; and (2) investment earn-
ings, which are U.S. source income.
Disaster and coronavirus-related tax re-
lief. If you are required to file a U.S. federal in-
come tax return, you may be entitled to some
special disaster and coronavirus-related rules
regarding the use of retirement funds. For more
information, see Form 8915-E and its instruc-
tions.
To determine whether you are required to
file a U.S. income tax return, see chapter 3.
Investment Income
This category includes such income as interest,
dividends, rents, and royalties.
Interest income. The source of interest in-
come is generally determined by the residence
of the payer. Interest paid by corporations cre-
ated or organized in a relevant territory (territory
corporation) or by individuals who are bona fide
residents of a relevant territory is considered in-
come from sources within that territory.
However, there is an exception to this rule if
you are a bona fide resident of a relevant terri-
tory, receive interest from a corporation created
or organized in that territory, and are a share-
holder of that corporation, and you own, directly
or indirectly, at least 10% of the total voting
stock of the corporation. See Regulations sec-
tion 1.937-2(i) for more information.
Dividends. Generally, dividends paid by a cor-
poration created or organized in a relevant terri-
tory will be considered income from sources
within that territory. There are additional rules
for bona fide residents of a relevant territory
who receive dividend income from territory cor-
porations, and who own, directly or indirectly, at
least 10% of the voting stock of the corporation.
For more information, see Regulations section
1.937-2(g).
Rental income. Rents from property located in
a relevant territory are treated as income from
sources within that territory.
Royalties. Royalties from natural resources lo-
cated in a relevant territory are considered in-
come from sources within that territory.
Also considered territory source income are
royalties received for the use of, or for the privi-
lege of using, in a relevant territory, patents,
copyrights, secret processes and formulas,
goodwill, trademarks, trade brands, franchises,
and other like property.
Sales or Other Dispositions
of Property
The source rules for sales or other dispositions
of property are varied. The most common situa-
tions are discussed below.
Real property. Real property includes land
and buildings, and generally anything built on,
growing on, or attached to land. The location of
the property generally determines the source of
income from the sale. For example, if you are a
bona fide resident of Guam and sell your home
that is located in Guam, the gain on the sale is
sourced in Guam. If, however, the home you
sold was located in the United States, the gain
is U.S. source income.
Personal property. The term “personal prop-
erty” refers to property (such as machinery,
equipment, or furniture) that is not real property.
Generally, gain (or loss) from the sale or other
disposition is sourced according to the seller's
tax home. If personal property is sold by a bona
fide resident of a relevant territory, the gain (or
loss) from the sale is treated as sourced within
that territory.
This rule does not apply to the sale of inven-
tory, intangible property, depreciable personal
property, or property sold through a foreign of-
fice or fixed place of business. The rules apply-
ing to sales of inventory are discussed below.
For information on sales of the other types of
property mentioned, see Internal Revenue
Code section 865.
Inventory. Your inventory is personal property
that is stock in trade or that is held primarily for
sale to customers in the ordinary course of your
trade or business. The source of income from
the sale of inventory depends on whether the
inventory was purchased or produced.
Purchased. Income from the sale of inven-
tory that you purchased is sourced where you
sell the property. Generally, this is where title to
the property passes to the buyer. However, in-
come from the sale of inventory purchased
within a U.S. territory and sold within the United
States is sourced based on an allocation. For
information on making the allocation, see Regu-
lations section 1.863-3.
Produced. Income from the sale of inven-
tory that you produced in a relevant territory and
sold outside that territory (or vice versa) is
sourced based on an allocation. For information
on making the allocation, see Regulations sec-
tion 1.863-3.
Special Rules for Gains From
Dispositions of Certain Property
There are special rules for gains from disposi-
tions of certain investment property (for exam-
ple, stocks, bonds, debt instruments, diamonds,
and gold) owned by a U.S. citizen or resident
alien prior to becoming a bona fide resident of a
territory. You are subject to these special rules if
you meet both of the following conditions.
•
For the tax year for which the source of the
gain must be determined, you are a bona
fide resident of the relevant territory.
•
For any of the 10 years preceding that
year, you were a citizen or resident alien of
the United States (other than a bona fide
resident of the relevant territory).
If you meet these conditions, gains from the
disposition of this property will not be treated as
income from sources within the relevant terri-
tory for purposes of the Internal Revenue Code.
Accordingly, bona fide residents of American
Samoa and Puerto Rico, for example, may not
exclude the gain on their U.S. tax return. (See
chapter 3 for additional filing information.) With
respect to the CNMI, Guam, and the USVI, the
gain from the disposition of this property will not
meet the requirements for certain tax rules that
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Chapter 2 Possession Source Income Page 9
may allow bona fide residents of those territo-
ries to reduce or obtain a rebate of taxes on in-
come from sources within the relevant territo-
ries.
For details, see Regulations section
1.937-2(f)(1) and Examples 1 and 2 of section
1.937-2(k).
Example 1. In 2014, Cheryl Jones, a U.S.
citizen, lived in the United States and paid
$1,000 for 100 shares of stock in the Rose Cor-
poration, a U.S. corporation listed on the New
York Stock Exchange. On March 1, 2017, she
moved to Puerto Rico and changed her tax
home to Puerto Rico on the same date. Cheryl
satisfied the presence test in 2017 and, under
the year-of-move exception, she was consid-
ered a bona fide resident of Puerto Rico for the
rest of 2017. On March 1, 2017, the closing
value of Cheryl's stock in the Rose Corporation
was $2,000. On January 5, 2020, while still a
bona fide resident of Puerto Rico, Cheryl sold
all her Rose Corporation stock for $7,000. Un-
der the special rules discussed earlier, none of
Cheryl's $6,000 gain will be treated as income
from sources within Puerto Rico.
The source rules discussed in the pre-
ceding paragraphs supplement, and
may apply in conjunction with, an exist-
ing special rule. This existing special rule ap-
plies if you are a U.S. citizen or resident alien
who becomes a bona fide resident of American
Samoa, the CNMI, or Guam, and who has gain
from the disposition of certain U.S. assets dur-
ing the 10-year period beginning when you be-
came a bona fide resident. The gain is U.S.
source income that is generally subject to U.S.
tax if the property is either (1) located in the Uni-
ted States; (2) stock issued by a U.S. corpora-
tion or a debt obligation of a U.S. person or of
the United States, a state (or political subdivi-
sion), or the District of Columbia; or (3) property
that has a basis in whole or in part by reference
to property described in (1) or (2). See chap-
ter 3 for filing information.
Special election. You can choose to treat the
part of gain (or loss) attributable to the time you
held the property while a bona fide resident of
the relevant territory (the territory holding pe-
riod) as gain (or loss) from sources within that
territory. Make the election by reporting the gain
attributable to the territory holding period on
your income tax return for the year of disposi-
tion. This election overrides both of the special
rules discussed earlier.
There are two methods for figuring the gain
(or loss) for the territory holding period, one for
marketable securities and another for other
types of investment property.
Marketable securities. Marketable securi-
ties are those actively traded on an established
financial market, such as stock in a publicly held
corporation. Under the special election, allocate
the gain (or loss) by figuring the appreciation
separately for your territory and U.S. holding
periods.
Your territory holding period begins on the
first day you do not have a tax home outside the
relevant territory. The gain (or loss) attributable
to the territory holding period is the difference in
CAUTION
!
fair market value of the security at the close of
the market on the first and last days of this hold-
ing period. This is your gain (or loss) that is trea-
ted as being from sources within the relevant
territory. If you were a bona fide resident of the
relevant territory for more than one continuous
period, combine the gains (or losses) from each
territory holding period.
Example 2. Assume the same facts as in
Example 1, except that Cheryl makes the spe-
cial election to allocate the gain between her
U.S. and territory holding periods. Cheryl's terri-
tory holding period began March 1, 2017, the
date her tax home changed to Puerto Rico.
Therefore, the portion of the gain attributable to
her territory holding period is $5,000 ($7,000
sale price – $2,000 closing value on the first day
of the territory holding period). By reporting
$5,000 of her $6,000 gain as Puerto Rico
source income on her 2020 Puerto Rico tax re-
turn (and the remainder as non-Puerto Rico
source income), Cheryl elects to treat that
amount as Puerto Rico source income.
Other personal property. For personal
property other than marketable securities, use a
time-based allocation. Figure the gain (or loss)
attributable to the territory holding period by
multiplying your total gain (or loss) by the fol-
lowing fraction.
Number of days in the
territory holding period
Total number of days
in your holding period
The result is your gain (or loss) that is trea-
ted as being from sources within the relevant
territory.
Example 3. In addition to the stock in Rose
Corporation, Cheryl acquired a 5% interest in
the Alder Partnership on January 1, 2016. On
March 1, 2017, when she established bona fide
residency in Puerto Rico, her partnership inter-
est was not considered a marketable security.
On September 15, 2020, while still a bona fide
resident of Puerto Rico, Cheryl sold her interest
in Alder Partnership for a $100,000 gain. She
had owned the interest for a total of 1,719 days.
Cheryl's territory holding period (from March 1,
2017, through September 15, 2020) is 1,294
days. The portion of her gain attributable to Pu-
erto Rico is $75,276 ($100,000 x (1,294 Puerto
Rico days ÷ 1,719 total days)). By reporting
$75,276 of her $100,000 gain as Puerto Rico
source income on her 2020 Puerto Rico tax re-
turn (and the remainder as non-Puerto Rico
source income), Cheryl elects to treat $75,276
as Puerto Rico source income.
Scholarships, Fellowships,
Grants, Prizes, and Awards
The source of these types of income is gener-
ally the residence of the payer, regardless of
who actually disburses the funds. Therefore, in
order to be territory source income, the payer
must be a resident of the relevant territory, such
as an individual who is a bona fide resident or a
corporation created or organized in that terri-
tory.
These rules do not apply to amounts
paid as salary or other compensation
for services. See Compensation for La-
bor or Personal Services, earlier in this chapter,
for the source rules that apply.
Effectively Connected
Income
In limited circumstances, some kinds of income
from sources outside the relevant territory must
be treated as effectively connected with a trade
or business in that territory. These circumstan-
ces are listed below.
•
You have an office or other fixed place of
business in the relevant territory to which
the income can be attributed.
•
That office or place of business is a mate-
rial factor in producing the income.
•
The income is produced in the ordinary
course of the trade or business carried on
through that office or other fixed place of
business.
An office or other fixed place of business is
a material factor if it significantly contributes to,
and is an essential economic element in, the
earning of the income.
The three kinds of income from sources out-
side the relevant territory to which these rules
apply are the following.
1. Rents and royalties for the use of, or for
the privilege of using, intangible personal
property located outside the relevant terri-
tory or from any interest in such property.
Included are rents or royalties for the use
of, or for the privilege of using, outside the
relevant territory, patents, copyrights, se-
cret processes and formulas, goodwill,
trademarks, trade brands, franchises, and
similar properties if the rents or royalties
are from the active conduct of a trade or
business in the relevant territory.
2. Dividends or interest from the active con-
duct of a banking, financing, or similar
business in the relevant territory.
3. Income, gain, or loss from the sale or ex-
change outside the relevant territory,
through the office or other fixed place of
business in the relevant territory, of:
a. Stock in trade,
b. Property that would be included in in-
ventory if on hand at the end of the tax
year, or
c. Property held primarily for sale to cus-
tomers in the ordinary course of busi-
ness.
Item (3) above will not apply if you sold the
property for use, consumption, or disposition
outside the relevant territory and an office or
other fixed place of business in a foreign coun-
try was a material factor in the sale.
Example. Marcy Jackson is a bona fide
resident of American Samoa. Her business,
CAUTION
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Page 10 Chapter 2 Possession Source Income
which she conducts from an office in American
Samoa, is developing and selling specialized
computer software. A software purchaser will
frequently pay Marcy an additional amount to
install the software on the purchaser's operating
system and to ensure that the software is func-
tioning properly. Marcy installs the software at
the purchaser's place of business, which may
be in American Samoa, in the United States, or
in another country. The income from selling the
software is effectively connected with the con-
duct of Marcy's business in American Samoa,
even though the product's destination may be
outside the territory. However, the compensa-
tion she receives for installing the software (per-
sonal services) outside of American Samoa is
not effectively connected with the conduct of
her business in the territory—the income is
sourced where she performs the services.
3.
Filing
Information for
Individuals in
Certain U.S.
Possessions
If you have income from American Samoa, the
CNMI, Guam, Puerto Rico, or the USVI, you
may have to file a tax return with the tax depart-
ment of that territory. Or you may have to file
two annual tax returns, one with the territory’s
tax department and the other with the IRS. This
chapter covers the general rules for filing re-
turns in the five territories.
You must first determine if you are a bona fide
resident of the relevant territory. See chapter 1
for a discussion of the requirements you must
meet.
You should ask for forms and advice about the
filing of territory tax returns from that territory’s
tax department, not the IRS. Contact informa-
tion is listed in this chapter under the heading
for each territory.
Disaster tax relief. If you are required to file
an income tax return with the IRS, you may be
entitled to disaster tax relief. For more informa-
tion about the tax relief that may be available,
see chapter 4.
American Samoa
American Samoa has its own separate and in-
dependent tax system. Although its tax laws are
modeled on the U.S. Internal Revenue Code,
there are certain differences.
Where To Get Forms and
Information
Requests for advice about matters
connected with American Samoan tax-
ation should be sent to:
American Samoa Government Tax Office
Executive Office Building
Pago Pago, AS 96799
The phone number is 684-633-4181.
You can access the American Samoa
Government Tax Office at
www.americansamoa.gov/tax-office-
page.
The fax number is 684-633-1513.
The addresses and phone numbers lis-
ted above are subject to change.
Which Returns To File
Your residency status and your source of in-
come with regard to American Samoa deter-
mine whether you file your return and pay your
tax to American Samoa, to the United States, or
to both.
In addition to the information below that is
categorized by residency status, the Special
Rules for American Samoa section, later, con-
tains important information for determining the
correct forms to file.
Bona Fide Resident of
American Samoa
Bona fide residents of American Samoa are
generally exempt from U.S. tax on their Ameri-
can Samoa source income.
U.S. citizen or resident alien. If you are a
U.S. citizen (or national) or resident alien and a
bona fide resident of American Samoa during
the tax year, you must generally file the follow-
ing returns.
•
An American Samoa tax return reporting
your gross income from worldwide sour-
ces. If you report non-American Samoa
source income on your American Samoa
tax return, you can claim a credit against
your American Samoa tax liability for in-
come taxes paid on that income to the Uni-
ted States, a foreign country, or another
territory.
•
A U.S. tax return reporting income from
worldwide sources, but excluding income
from sources within American Samoa.
However, amounts received for services
performed as an employee of the United
States or any of its agencies cannot be ex-
cluded (see Wages of U.S. government
employees under Special Rules for Ameri-
can Samoa, later).
CAUTION
!
To exclude American Samoa source in-
come, attach a completed Form 4563 to your
U.S. tax return (see Form 4563, later, for more
information). If you are excluding American Sa-
moa source income on your U.S. tax return, you
will not be allowed any deductions from gross
income or credits against tax that are directly or
indirectly allocable to the excluded income. For
more information, see Special Rules for Com-
pleting Your U.S. Tax Return in chapter 4.
If all of your income is from American Sa-
moa sources, you are not required to file a U.S.
tax return. However, if you have self-employ-
ment income, see Self-employment tax, later.
Nonresident alien. If you are a bona fide resi-
dent of American Samoa during the tax year,
but a nonresident alien of the United States,
you must generally file the following returns.
•
An American Samoa tax return reporting
worldwide income.
•
A U.S. tax return (Form 1040 or 1040-SR)
reporting income from worldwide sources,
but excluding American Samoa source in-
come other than amounts for services per-
formed as an employee of the United
States or any of its agencies. For more in-
formation, see Wages of U.S. government
employees under Special Rules for Ameri-
can Samoa, later. To exclude income from
sources within American Samoa, attach a
completed Form 4563 to your U.S. tax re-
turn (see Form 4563, later, for more infor-
mation).
For all other tax purposes, however,
you will be treated as a nonresident alien
individual. For example, you are not al-
lowed the standard deduction, you cannot
file a joint return, and you are not allowed a
deduction for a dependent unless that per-
son is a citizen or national of the United
States. There are also limitations on what
deductions and credits are allowed. See
Pub. 519 for more information.
Form 4563. If you must file a U.S. income tax
return and you qualify to exclude any of your in-
come from American Samoa, claim the exclu-
sion by completing Form 4563 and attaching it
to your Form 1040 or 1040-SR. Form 4563 can-
not be filed by itself. There is an example of a
filled-in Form 4563 in chapter 5.
Where to file. If you are a bona fide resident of
American Samoa during the tax year and you
are not including a check or a money order,
send your U.S. tax return and all attachments
(including Form 4563) to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments (including Form 4563) to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
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Chapter 3 Filing Information for Individuals in Certain U.S. Possessions Page 11
Send your American Samoa tax return and
all attachments to the address given under
Where To Get Forms and Information, earlier.
Self-employment tax. If you are not required
to file a U.S. tax return but have income that is
effectively connected with a trade or business in
American Samoa, you must file Form 1040-SS
with the United States. On this form, you will re-
port your self-employment income to the United
States, and, if necessary, pay self-employment
tax on that income. For more information, see
Self-Employment Tax in chapter 4.
Additional Medicare Tax. You may be re-
quired to pay Additional Medicare Tax. Also,
you may need to report Additional Medicare
Tax withheld by your employer. For more infor-
mation, see Additional Medicare Tax under
Special Rules for Completing Your U.S. Tax
Return in chapter 4.
Net Investment Income Tax. The Net Invest-
ment Income Tax (NIIT) is 3.8% of the lesser of
an individual’s net investment income or the ex-
cess of the individual’s modified adjusted gross
income over a specified threshold amount. The
NIIT will apply to a bona fide resident of Ameri-
can Samoa if a taxpayer has modified adjusted
gross income from sources outside of American
Samoa that exceeds a specified threshold
amount, for example, $200,000 for single filers.
The NIIT does not apply to any individual who is
a nonresident alien with respect to the United
States. See Form 8960 and its instructions for
more information on the NIIT.
Estimated tax payments. To see if you are
required to make payments of estimated in-
come tax, self-employment tax, Additional Med-
icare Tax, and/or NIIT to the IRS, get Form
1040-ES.
To pay by check or money order, send your
payment with the Form 1040-ES payment
voucher to:
Internal Revenue Service
P.O. Box 1300
Charlotte, NC 28201-1300
USA
To get information on paying electronically
(by credit or debit card, or through the Elec-
tronic Federal Tax Payment System (EFTPS)),
go to IRS.gov/Payments.
For information on making estimated in-
come tax payments to American Samoa, see
Where To Get Forms and Information, earlier.
Not a Bona Fide Resident of
American Samoa
An individual who is not a bona fide resident of
American Samoa for the tax year but has in-
come sourced in American Samoa, generally
files both U.S. and American Samoa tax re-
turns, and claims a foreign tax credit on the U.S.
return for taxes paid to American Samoa.
U.S. citizen or resident alien. If you are a
U.S. citizen or resident alien but not a bona fide
resident of American Samoa during the tax
year, you must generally file the following re-
turns.
•
An American Samoa tax return reporting
only your income from sources within
American Samoa. Wages for services per-
formed in American Samoa, whether for a
private employer, the U.S. government, or
otherwise, are income from sources within
American Samoa.
•
A U.S. tax return reporting your income
from worldwide sources. You can take a
credit against your U.S. tax liability if you
paid income taxes to American Samoa (or
other territory or foreign country) and re-
ported income from those sources on your
U.S. tax return.
De minimis exception to determining
source of income. In certain situations, you
will not have income from a territory. See De
minimis exception under Compensation for La-
bor or Personal Services in chapter 2.
Nonresident alien. If you are a nonresident
alien of the United States who does not qualify
as a bona fide resident of American Samoa for
the tax year, you must generally file the follow-
ing returns.
•
An American Samoa tax return reporting
only your income from sources within
American Samoa. In this situation, wages
for services performed in American Sa-
moa, whether for a private employer, the
U.S. government, or otherwise, is income
from sources within American Samoa.
•
A U.S. tax return (Form 1040-NR) report-
ing U.S. source income according to the
rules for a nonresident alien. See the In-
structions for Form 1040-NR.
Where to file. If you are not a bona fide resi-
dent of American Samoa during the tax year,
and you are not including a check or a money
order, send your U.S. tax return and all attach-
ments to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
Send your American Samoa tax return and
all attachments to the address given under
Where To Get Forms and Information, earlier.
Special Rules for American
Samoa
Some special rules apply to certain types of in-
come and employment connected with Ameri-
can Samoa.
Wages of U.S. government employees. U.S.
government wages, including for services per-
formed in American Samoa, are considered
U.S. source income and must be reported on
both your U.S. and American Samoa income
tax returns.
If you are a bona fide resident of American
Samoa, you may have to file an income tax re-
turn with both the United States and American
Samoa.
•
On your U.S. income tax return, you must
report all non-American Samoa source in-
come, including your pay from the U.S.
government for services performed in
American Samoa. You can claim a with-
holding credit on your U.S. return for fed-
eral income taxes withheld from your fed-
eral wages.
•
On your American Samoa income tax re-
turn, you must report all income from all
sources, including your wages from the
U.S. government for services performed in
American Samoa. On this return, you may
claim an American Samoa tax credit for net
income tax paid to the United States on the
same income.
If you are not a bona fide resident of Ameri-
can Samoa, you must file an income tax return
with the United States and you may also have
to file one with American Samoa. On your U.S.
income tax return, you must report your pay
from the U.S. government. On your American
Samoa income tax return, you must report in-
come from American Samoa sources.
For further information about your American
Samoa income tax obligations, contact the
American Samoa Government Tax Office at the
address and phone number indicated in chap-
ter 3.
Active duty member of the U.S. Armed
Forces. If you are an active duty member of
the U.S. Armed Forces, you are not required to
file an income tax return with both the United
States and American Samoa. Instead, you will
only be required to file an income tax return with
one of those jurisdictions, depending upon
whether or not you are a bona fide resident of
American Samoa.
•
If you are a bona fide resident of American
Samoa (your state of legal residence is in
American Samoa) but you are stationed
outside American Samoa in compliance
with military orders, you are only required
to file an income tax return with American
Samoa. On this return, you must report all
income from all sources, including your
pay from the U.S. Armed Forces for serv-
ices performed anywhere in the world.
•
If you are not a bona fide resident of Ameri-
can Samoa (your state of legal residence
is other than American Samoa) but you are
stationed in American Samoa in compli-
ance with military orders, you are not re-
quired to file an income tax return with
American Samoa. Instead, you must file an
income tax return with the United States
(or other U.S. territory if you are a bona
fide resident of the other territory) to report
all income from all sources, including your
pay from the U.S. Armed Forces for serv-
ices performed in American Samoa.
National Guard and military reservists.
Members of the National Guard or a reserve
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Page 12 Chapter 3 Filing Information for Individuals in Certain U.S. Possessions
component of the U.S. Armed Forces will gen-
erally follow the income tax rules for U.S. gov-
ernment employees, not for active duty mem-
bers of the U.S. Armed Forces.
Civilian spouse of active duty member of
the U.S. Armed Forces. If you are a civilian
spouse of an active duty member of the U.S.
Armed Forces, see Special rule for civilian
spouse of active duty member of the U.S.
Armed Forces in chapter 1 for more information.
The spouse of the service member may
elect to use the same residence for tax purpo-
ses as the service member regardless of the
date on which the marriage of the spouse and
service member occurred.
Federal retiree pension income. Federal re-
tirees who are bona fide residents of American
Samoa must file an income tax return with
American Samoa to report all income from all
sources, including federal pension income. The
retiree may also have an income tax filing re-
quirement with the United States, depending
upon the source of the retiree’s pension in-
come. Pension income can have multiple sour-
ces. See Pensions and other source of income
rules in chapter 2 for more information. If any
part of the pension income is sourced in the
United States, the retiree must also file an in-
come tax return with the United States.
Disaster and coronavirus-related tax re-
lief. If you are required to file a U.S. federal in-
come tax return, you may be entitled to some
special disaster and coronavirus-related rules
regarding the use of retirement funds. For more
information, see Form 8915-E and its instruc-
tions.
Moving expense deduction. The deduction
for moving expenses is suspended unless you
are a member of the U.S. Armed Forces who
moves pursuant to a military order and incident
to a permanent change of station. For more in-
formation, see Pub. 3. If you meet these re-
quirements, see the discussion below.
Generally, expenses of a move to American
Samoa are directly attributable to American Sa-
moan wages, salaries, and other earned in-
come. Likewise, the expenses of a move back
to the United States are generally attributable to
U.S. earned income.
If your move was to American Samoa, report
your deduction for moving expenses as follows.
•
If you are a bona fide resident in the tax
year of your move, enter your deductible
expenses on your American Samoa tax re-
turn.
•
If you are not a bona fide resident, enter
your deductible expenses on both your
American Samoa and U.S. tax returns.
Also, for purposes of a tax credit against
your U.S. tax liability, reduce your Ameri-
can Samoa general category income on
Form 1116, line 1a, by entering the deduc-
tible moving expenses on line 2.
If your move was to the United States, com-
plete Form 3903, and enter the deductible
amount on Schedule 1 (Form 1040), line 13.
Double Taxation
A mutual agreement procedure exists to settle
cases of double taxation between the United
States and American Samoa. See Double Tax-
ation in chapter 4.
The Commonwealth
of Puerto Rico
The Commonwealth of Puerto Rico has its own
separate and independent tax system. Although
it is modeled after the U.S. system, there are
differences in law and tax rates.
Where To Get Forms and
Information
Requests for information about the fil-
ing of Puerto Rico tax returns should
be addressed to:
Departamento de Hacienda
Negociado de Asistencia Contributiva
P.O. Box 9024140
San Juan, Puerto Rico 00902-4140
The phone numbers are 787-622-0123
and 787-620-2323.
You can access the Hacienda website
at www.hacienda.gobierno.pr.
The addresses and phone numbers lis-
ted above are subject to change.
Which Returns To File
Generally, you will file returns with both Puerto
Rico and the United States. The income repor-
ted on each return depends on your residency
status in Puerto Rico. To determine if you are a
bona fide resident of Puerto Rico and have in-
come sourced within and outside Puerto Rico,
see the information in chapter 1.
Bona Fide Resident of Puerto Rico
Bona fide residents of Puerto Rico will generally
pay tax to Puerto Rico on their worldwide in-
come.
U.S. citizen or resident alien. If you are a
U.S. citizen or resident alien and also a bona
fide resident of Puerto Rico during the tax year,
you must generally file the following returns.
•
A Puerto Rico tax return reporting income
from worldwide sources. If you report U.S.
source income on your Puerto Rico tax re-
turn, you can claim a credit against your
Puerto Rico tax, up to the amount allowa-
ble, for income taxes paid to the United
States.
•
A U.S. tax return reporting income from
worldwide sources, but excluding Puerto
Rico source income. However, see U.S.
government employees under Special
CAUTION
!
Rules for Puerto Rico, later, for an excep-
tion.
If you are excluding Puerto Rico income on
your U.S. tax return, you will not be allowed any
deductions or credits that are directly or indi-
rectly allocable to exempt income. For more in-
formation, see Special Rules for Completing
Your U.S. Tax Return in chapter 4.
If all of your income is from Puerto Rico
sources, you are not required to file a U.S. tax
return. However, if you have self-employment
income, see Self-employment tax, later.
U.S. citizen only. If you are a U.S. citizen, you
may also qualify under these rules if you have
been a bona fide resident of Puerto Rico for at
least 2 years before moving from Puerto Rico.
In this case, you can exclude your income de-
rived from sources within Puerto Rico (but not
wages and salaries received as an employee of
the U.S. government or its agencies) that you
earned before the date you changed your resi-
dence. For more information, see Puerto Rico
under Year of Moving From a Territory in chap-
ter 1.
Nonresident alien. If you are a bona fide resi-
dent of Puerto Rico during the tax year, but a
nonresident alien of the United States, you must
generally file the following returns.
•
A Puerto Rico tax return reporting income
from worldwide sources. If you report U.S.
source income on your Puerto Rico tax re-
turn, you can claim a credit against your
Puerto Rico tax, up to the amount allowa-
ble, for income taxes paid to the United
States.
•
A U.S. tax return (Form 1040-NR) report-
ing income from worldwide sources, but
excluding Puerto Rico source income
(other than amounts for services per-
formed as an employee of the United
States or any of its agencies). For tax pur-
poses other than reporting income, how-
ever, you will be treated as a nonresident
alien individual. For example, you are not
allowed the standard deduction, you can-
not file a joint return, and you are not al-
lowed a deduction for a dependent unless
that person is a citizen or national of the
United States. There are also limitations on
what deductions and credits are allowed.
See Pub. 519 for more information.
Self-employment tax. If you have no U.S. fil-
ing requirement but have income that is effec-
tively connected with a trade or business in Pu-
erto Rico, you must file Form 1040-SS or Form
1040-PR with the United States to report your
self-employment income and, if necessary, pay
self-employment tax. For more information, see
Self-Employment Tax in chapter 4.
Additional Medicare Tax. You may be re-
quired to pay Additional Medicare Tax. Also,
you may need to report Additional Medicare
Tax withheld by your employer. For more infor-
mation, see Additional Medicare Tax under
Special Rules for Completing Your U.S. Tax
Return in chapter 4.
Net Investment Income Tax. The Net Invest-
ment Income Tax (NIIT) is 3.8% of the lesser of
an individual’s net investment income or the
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Chapter 3 Filing Information for Individuals in Certain U.S. Possessions Page 13
excess of the individual’s modified adjusted
gross income over a specified threshold
amount. The NIIT will apply to a bona fide resi-
dent of Puerto Rico if a taxpayer has modified
adjusted gross income from sources outside of
Puerto Rico that exceeds a specified threshold
amount, for example, $200,000 for single filers.
The NIIT does not apply to any individual who is
a nonresident alien with respect to the United
States. See Form 8960 and its instructions for
more information on the NIIT.
Estimated tax payments. To see if you are
required to make payments of estimated in-
come tax, self-employment tax, Additional Med-
icare Tax, and/or NIIT to the IRS, get Form
1040-ES (or Form 1040-ES(PR)).
To pay by check or money order, send your
payment with the Form 1040-ES (or Form
1040-ES(PR)) payment voucher to:
Internal Revenue Service
P.O. Box 1300
Charlotte, NC 28201-1300
USA
To get information on paying electronically
(by credit or debit card, or through the Elec-
tronic Federal Tax Payment System (EFTPS)),
go to IRS.gov/Payments.
For information on making estimated in-
come tax payments to Hacienda, see Where To
Get Forms and Information, earlier.
Not a Bona Fide Resident of
Puerto Rico
An individual who is not a bona fide resident of
Puerto Rico for the tax year may have to file tax
returns with both Puerto Rico and the United
States.
U.S. citizen or resident alien. If you are a
U.S. citizen or resident alien but not a bona fide
resident of Puerto Rico during the tax year, you
must generally file the following returns.
•
A Puerto Rico tax return reporting only
your income from Puerto Rico sources.
Wages for services performed in Puerto
Rico, whether for a private employer, the
U.S. government, or otherwise, are income
from Puerto Rico sources.
•
A U.S. tax return reporting income from
worldwide sources. Generally, you can
claim a foreign tax credit for income taxes
paid to Puerto Rico on the Puerto Rico in-
come that is subject to Puerto Rico taxes
and not exempt from U.S. taxes (see chap-
ter 4 for more information).
Nonresident alien. If you are a nonresident
alien of the United States who does not qualify
as a bona fide resident of Puerto Rico for the
tax year, you must generally file the following
returns.
•
A Puerto Rico tax return reporting only
your income from Puerto Rico sources.
Wages for services performed in Puerto
Rico, whether for a private employer, the
U.S. government, or otherwise, is income
from Puerto Rico sources.
•
A U.S. tax return (Form 1040-NR) accord-
ing to the rules for a nonresident alien. See
the Instructions for Form 1040-NR.
De minimis exception to determining
source of income. In certain situations, you
will not have income from a territory. See De
minimis exception under Compensation for La-
bor or Personal Services in chapter 2.
Where to file. Use the addresses listed below
to file your U.S. and Puerto Rico income tax re-
turns.
If you are not including a check or a money
order, send your U.S. tax return and all attach-
ments to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
If you request a refund on your Puerto Rico
return, send your Puerto Rico tax return and all
attachments to:
Departamento de Hacienda
P.O. Box 50072
San Juan, PR 00902-6272
Send all other Puerto Rico tax returns, with
all attachments, to:
Departamento de Hacienda
P.O. Box 9022501
San Juan, PR 00902-2501
Special Rules for Puerto
Rico
In addition to the general rules given earlier for
filing U.S. and Puerto Rico tax returns, there are
some special rules that apply to certain individ-
uals and types of income.
U.S. government employees. Wages and
cost-of-living allowances paid by the U.S. gov-
ernment (or one of its agencies) for working in
Puerto Rico are subject to Puerto Rico tax.
However, the cost-of-living allowances are ex-
cluded from Puerto Rico gross income up to the
amount exempt from U.S. tax. In order to claim
this exclusion, you must:
•
Include with your Puerto Rico tax return
evidence to show the amount received
during the year, and
•
Be in full compliance with your Puerto Rico
tax responsibilities.
These wages are also subject to U.S. tax,
but the cost-of-living allowances are excluda-
ble. A foreign tax credit is available in order to
avoid double taxation.
U.S. Armed Forces. Bona fide residents of
Puerto Rico include active duty military person-
nel whose official home of record is Puerto
Rico.
Civilian spouse of active duty member of
the U.S. Armed Forces. If, under the rule dis-
cussed at the beginning of chapter 1 (see Spe-
cial rule for civilian spouse of active duty mem-
ber of the U.S. Armed Forces), your tax
residence is Puerto Rico, follow the guidance in
the section for bona fide residents under Which
Returns To File, earlier. However, if your tax
residence is one of the 50 states or the District
of Columbia and your only income from Puerto
Rico is from wages, salaries, tips, or self-em-
ployment, you will be taxed on your worldwide
income and file only a U.S. tax return (Form
1040 or 1040-SR) and a state and/or local tax
return, if required. If you have income from Pu-
erto Rico other than wages, salaries, tips, or
self-employment that is considered to be
sourced in that territory (see Table 2-1), contact
the Hacienda for guidance.
The spouse of the service member may
elect to use the same residence for tax purpo-
ses as the service member regardless of the
date on which the marriage of the spouse and
service member occurred.
Income from sources outside Puerto Rico
and the United States. If you are a U.S. citi-
zen and bona fide resident of Puerto Rico and
you have income from sources outside both Pu-
erto Rico and the United States, that income is
treated as foreign source income under both tax
systems. In addition to your Puerto Rico and
U.S. tax returns, you may also have to file a re-
turn with the country or territory from which your
outside income was derived. To avoid double
taxation, a foreign tax credit is generally availa-
ble for either the U.S. or Puerto Rico return.
Example. Thomas Red is a bona fide resi-
dent of Puerto Rico and a U.S. citizen. He trav-
eled to the Dominican Republic and worked in
the construction industry for 1 month. His wa-
ges were $20,000. Because the wages were
earned outside Puerto Rico and outside the
United States, Thomas must file a tax return
with Puerto Rico and the United States. He may
also have to file a tax return with the Dominican
Republic.
Moving expense deduction. The deduction
for moving expenses is suspended unless you
are a member of the U.S. Armed Forces who
moves pursuant to a military order and incident
to a permanent change of station. For more in-
formation, see Pub. 3. If you meet these re-
quirements, see the discussion below.
Generally, expenses of a move to Puerto
Rico are directly attributable to wages, salaries,
and other earned income from Puerto Rico.
Likewise, the expenses of a move back to the
United States are generally attributable to U.S.
earned income.
If your move was to Puerto Rico, report your
deduction for moving expenses as follows.
•
If you are a bona fide resident in the tax
year of your move, enter your deductible
expenses on your Puerto Rico tax return.
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Page 14 Chapter 3 Filing Information for Individuals in Certain U.S. Possessions
•
If you are not a bona fide resident, enter
your deductible expenses on both your Pu-
erto Rico and U.S. tax returns. Also, for
purpose of a tax credit against your U.S.
tax liability, reduce your Puerto Rico gen-
eral category income on Form 1116,
line 1a, by entering the deductible moving
expenses on line 2.
If your move was to the United States, com-
plete Form 3903, and enter the deductible
amount on Schedule 1 (Form 1040), line 13.
Additional child tax credit (ACTC). If you are
not required to file a U.S. income tax return, this
credit is available only if you meet all three of
the following conditions.
•
You were a bona fide resident of Puerto
Rico during the tax year.
•
Social security and Medicare taxes were
withheld from your wages or you paid
self-employment tax.
•
You had three or more qualifying children.
(For the definition of a qualifying child, see
the instructions for Form 1040-PR or Form
1040-SS.)
If your income exceeds certain levels, you
may be disqualified from receiving this credit.
Use Form 1040-PR or Form 1040-SS to claim
the ACTC.
Double Taxation
A mutual agreement procedure exists to settle
cases of double taxation between the United
States and the Commonwealth of Puerto Rico.
See Double Taxation in chapter 4.
The Commonwealth of
the Northern Mariana
Islands
The CNMI has its own tax system based partly
on the same tax laws and tax rates that apply to
the United States and partly on local taxes im-
posed by the CNMI government.
Where To Get Forms and
Information
Requests for advice about CNMI resi-
dency and tax matters should be ad-
dressed to:
Commonwealth of the Northern Mariana
Islands
Division of Revenue and Taxation
P.O. Box 5234 CHRB
Dandan Commercial Center
Saipan, MP 96950
You can order forms and publications
by calling 670-664-1000.
You can order forms and publications
through fax at 670-664-1015.
The addresses and phone numbers lis-
ted above are subject to change.
Which Return To File
In general, all individuals with income from the
CNMI will file only one return, either to the
CNMI or to the United States. Your residency
status with regard to the CNMI determines
which return you will file. Be sure to check the
Special Rules for the Commonwealth of the
Northern Mariana Islands, later, for additional
information about filing your tax return.
Bona Fide Resident of the
Commonwealth of the Northern
Mariana Islands
If you are a U.S. citizen, resident alien, or non-
resident alien and a bona fide resident of the
CNMI during the tax year, file your income tax
return with the CNMI.
•
Include income from worldwide sources on
your CNMI return. In determining your total
tax payments, include all income tax with-
held and paid to either the CNMI or the
United States, any credit for an overpay-
ment of income tax to either the CNMI or
the United States, and any payments of
estimated tax to either the CNMI or the
United States. Pay any balance of tax due
with your tax return.
•
Generally, if you properly file your return
with, and fully pay your income tax to, the
CNMI, then you are not liable for filing an
income tax return with, or for paying tax to,
the United States for the tax year. How-
ever, if you were self-employed in 2020,
see Self-employment tax, later.
Example. David Gold was a bona fide resi-
dent of the CNMI for 2020. He received wages
of $30,000 paid by a private employer in the
CNMI and dividends of $4,000 from U.S. corpo-
rations that carry on business mainly in the Uni-
ted States. He must file a 2020 income tax re-
turn with the CNMI Division of Revenue and
Taxation. He reports his total income of
$34,000 on the CNMI return.
Where to file. If you are a bona fide resident of
the CNMI for the tax year, send your return and
all attachments to the Division of Revenue and
Taxation at the address given earlier.
U.S. Citizen or Resident Alien
(Other Than a Bona Fide Resident
of the Commonwealth of the
Northern Mariana Islands)
If you have income from sources within the
CNMI and are a U.S. citizen or resident alien,
but you are not a bona fide resident of the CNMI
during the tax year, file your income tax return
with the United States.
•
Include income from worldwide sources on
your U.S. return. In determining your total
tax payments, include all income tax with-
held and paid to either the United States or
the CNMI, any credit for an overpayment of
income tax to either the United States or
the CNMI, and any payments of estimated
CAUTION
!
tax to either the CNMI or the United States.
Pay any balance of tax due with your tax
return.
Note. You may also need to complete
Form 5074.
•
You are not liable for filing an income tax
return with, or for paying tax to, the CNMI
for the tax year.
Form 5074. If you file a U.S. income tax return,
attach a completed Form 5074 if you (and your
spouse if filing a joint return) have:
•
Adjusted gross income of $50,000 or more
for the tax year, and
•
Gross income of $5,000 or more from
sources within the CNMI.
The United States and the CNMI use this
form to divide your income taxes.
There is an example of a filled-in Form 5074
in chapter 5.
De minimis exception to determining
source of income. In certain situations, you
will not have income from a territory. See De
minimis exception under Compensation for La-
bor or Personal Services in chapter 2.
Citizen or resident alien of the United
States but not a bona fide resident of the
Commonwealth of the Northern Mariana Is-
lands. If you are a citizen or resident alien of
the United States but not a bona fide resident of
the CNMI during the tax year and you are not in-
cluding a check or a money order, send your re-
turn and all attachments to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
Nonresident Alien (Other Than a
Bona Fide Resident of the
Commonwealth of the Northern
Mariana Islands)
If you are a nonresident alien of the United
States who does not qualify as a bona fide resi-
dent of the CNMI for the tax year, you must
generally file the following returns.
•
A CNMI tax return reporting only your in-
come from sources within the CNMI. In this
situation, wages for services performed in
the CNMI, whether for a private employer,
the U.S. government, or otherwise, are in-
come from sources within the CNMI.
•
A U.S. tax return (Form 1040-NR) report-
ing U.S. source income according to the
rules for a nonresident alien. See the In-
structions for Form 1040-NR.
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Chapter 3 Filing Information for Individuals in Certain U.S. Possessions Page 15
If you are not a bona fide resident of the
CNMI during the tax year and you are not in-
cluding a check or a money order, send your
U.S. tax return and all attachments to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
Send your CNMI tax return and all attach-
ments to:
Department of Finance
Division of Revenue and Taxation
Commonwealth of the Northern Mariana
Islands
P.O. Box 5234 CHRB
Saipan, MP 96950
Citizen of the Commonwealth of
the Northern Mariana Islands
If you are a citizen of the CNMI (meaning that
you were born or naturalized in the CNMI) but
not otherwise a U.S. citizen or a U.S. resident
alien during the tax year, file your income tax re-
turn with the CNMI. Include income from world-
wide sources on your CNMI return. Take into
account tax withheld by both jurisdictions in de-
termining if there is tax overdue or an overpay-
ment. Pay any balance of tax due with your tax
return. Send your return and all attachments to:
Department of Finance
Division of Revenue and Taxation
Commonwealth of the Northern Mariana
Islands
P.O. Box 5234 CHRB
Saipan, MP 96950
Special Rules for the
Commonwealth of the
Northern Mariana Islands
Special rules apply to certain types of income,
employment, and filing status.
Joint return. If you file a joint return, file your
return (and pay the tax) with the jurisdiction
where the spouse who has the greater adjusted
gross income (AGI) would have to file if you
were filing separately. If the spouse with the
greater AGI is a bona fide resident of the CNMI
during the tax year, file the joint return with the
CNMI. If the spouse with the greater AGI is a
U.S. citizen or resident alien but not a bona fide
resident of the CNMI during the tax year, file
your joint return with the United States. For this
purpose, income is determined without regard
to community property laws.
Example. Marsha Blue, a U.S. citizen, was
a resident of the United States, and her spouse,
a citizen of both the CNMI and the United
States, was a bona fide resident of the CNMI,
during the tax year. Marsha earned $65,000 as
a computer programmer in the United States.
Her spouse earned $20,000 as an artist in the
CNMI. Marsha and her spouse will file a joint re-
turn. Because Marsha has the greater AGI, she
and her spouse must file their return with the
United States and report the entire $85,000 on
that return.
U.S. Armed Forces. If you are a member of
the U.S. Armed Forces on active duty who
qualified as a bona fide resident of the CNMI in
a prior tax year, your absence from the CNMI
solely in compliance with military orders will not
change your bona fide residency. If you did not
qualify as a bona fide resident of the CNMI in a
prior tax year, your presence in the CNMI solely
in compliance with military orders will not qualify
you as a bona fide resident of the CNMI.
Civilian spouse of active duty member
of the U.S. Armed Forces. If, under the rule
discussed at the beginning of chapter 1 (see
Special rule for civilian spouse of active duty
member of the U.S. Armed Forces), your tax
residence is the CNMI, follow the guidance in
the section for bona fide residents under Which
Return To File, earlier. However, if your tax resi-
dence is one of the 50 states or the District of
Columbia and your only income from the CNMI
is from wages, salaries, tips, or self-employ-
ment, you will be taxed on your worldwide in-
come and file only a U.S. tax return (Form 1040
or 1040-SR) and a state and/or local tax return,
if required. If you have income from the CNMI
other than wages, salaries, tips, or self-employ-
ment that is considered to be sourced in that
territory (see Table 2-1), you may need to file
Form 5074 with your U.S. tax return.
The spouse of the service member may
elect to use the same residence for tax purpo-
ses as the service member regardless of the
date on which the marriage of the spouse and
service member occurred.
Moving expense deduction. The deduction
for moving expenses is suspended unless you
are a member of the U.S. Armed Forces who
moves pursuant to a military order and incident
to a permanent change of station. For more in-
formation, see Pub. 3. If you meet these re-
quirements, see the discussion below.
Generally, expenses of a move to the CNMI
are directly attributable to wages, salaries, and
other earned income from the CNMI. Likewise,
the expenses of a move back to the United
States are generally attributable to U.S. earned
income.
If your move was to the CNMI, report your
deduction for moving expenses as follows.
•
If you are a bona fide resident in the tax
year of your move, enter your deductible
expenses on your CNMI tax return.
•
If you are not a bona fide resident, enter
your deductible expenses on Form 3903,
and enter the deductible amount on
Schedule 1 (Form 1040), line 13, and on
Form 5074, line 20.
If your move was to the United States, com-
plete Form 3903, and enter the deductible
amount on Schedule 1 (Form 1040), line 13.
Self-employment tax. If you have no U.S. fil-
ing requirement, but have income that is effec-
tively connected with a trade or business in the
CNMI, you must file Form 1040-SS with the Uni-
ted States to report your self-employment in-
come and, if necessary, pay self-employment
tax.
Additional Medicare Tax. You may be re-
quired to pay Additional Medicare Tax. Also,
you may need to report Additional Medicare
Tax withheld by your employer. For more infor-
mation, see Additional Medicare Tax under
Special Rules for Completing Your U.S. Tax
Return in chapter 4.
Estimated tax payments. To see if you are
required to make payments of estimated in-
come tax, self-employment tax, and/or Addi-
tional Medicare Tax to the IRS, get Form
1040-ES.
Payment of estimated tax. If you must
pay estimated tax, make your payment to the
jurisdiction where you would file your income
tax return if your tax year were to end on the
date your first estimated tax payment is due.
Generally, you should make the rest of your
quarterly payments of estimated tax to the juris-
diction where you made your first payment of
estimated tax. However, estimated tax pay-
ments to either jurisdiction will be treated as
payments to the jurisdiction with which you file
the tax return.
If you make a joint payment of estimated tax,
make your payment to the jurisdiction where the
spouse who has the greater estimated AGI
would have to pay (if a separate payment were
made). For this purpose, income is determined
without regard to community property laws.
Early payment. If you make your first pay-
ment of estimated tax early, follow the rules
given earlier to determine where to send it. If
you send it to the wrong jurisdiction, make all
later payments to the jurisdiction to which the
first payment should have been sent.
To pay by check or money order, send your
payment with the Form 1040-ES payment
voucher to:
Internal Revenue Service
P.O. Box 1300
Charlotte, NC 28201-1300
USA
To get information on paying electronically
(by credit or debit card, or through the Elec-
tronic Federal Tax Payment System (EFTPS)),
go to IRS.gov/Payments.
For information on making estimated in-
come tax payments to the CNMI, see Where To
Get Forms and Information, earlier.
Double Taxation
A mutual agreement procedure exists to settle
cases of double taxation between the United
States and the Commonwealth of the Northern
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Page 16 Chapter 3 Filing Information for Individuals in Certain U.S. Possessions
Mariana Islands. See Double Taxation in chap-
ter 4.
Guam
Guam has its own tax system based on the
same tax laws and tax rates that apply in the
United States.
Where To Get Forms and
Information
Requests for advice about Guam resi-
dency and tax matters should be ad-
dressed to:
Department of Revenue and Taxation
Taxpayer Services Division
P.O. Box 23607
GMF, Guam 96921
You can order forms and publications
by calling 671-635-1840 or
671-635-1841.
You can order forms and publications
through fax at 671-633-2643.
You can get forms and publications at
www.guamtax.com.
The addresses and phone numbers lis-
ted above are subject to change.
Which Return To File
Bona fide residents of Guam are subject to spe-
cial U.S. tax rules. In general, all individuals with
income from Guam will file only one return—ei-
ther to Guam or the United States.
Bona Fide Resident of Guam
If you are a bona fide resident of Guam during
the tax year, file your return with Guam. This ap-
plies to all bona fide residents who are citizens,
resident aliens, or nonresident aliens of the Uni-
ted States.
•
Include income from worldwide sources on
your Guam return. In determining your total
tax payments, include all income tax with-
held and paid to either Guam or the United
States, any credit for an overpayment of in-
come tax to either Guam or the United
States, and any payments of estimated tax
to either Guam or the United States. Pay
any balance of tax due with your tax return.
•
Generally, if you properly file your return
with, and fully pay your income tax to,
Guam, then you are not liable for filing an
income tax return with, or for paying tax to,
the United States. However, if you were
self-employed in 2020, see Self-employ-
ment tax, later.
Example. Gary Barker was a bona fide res-
ident of Guam for 2020. He received wages of
$25,000 paid by a private employer in Guam
CAUTION
!
and dividends of $2,000 from U.S. corporations
that carry on business mainly in the United
States. He must file a 2020 income tax return
with the government of Guam. He reports his
total income of $27,000 on the Guam return.
If you are a bona fide resident of Guam for
the tax year, send your return and all attach-
ments to:
Department of Revenue and Taxation
Taxpayer Services Division
P.O. Box 23607
GMF, Guam 96921
U.S. Citizen or Resident Alien
(Other Than a Bona Fide Resident
of Guam)
If you have income from sources within Guam
and are a U.S. citizen or resident alien, but you
are not a bona fide resident of Guam during the
tax year, file your income tax return with the
United States.
•
Include income from worldwide sources on
your U.S. return. In determining your total
tax payments, include all income tax with-
held and paid to either the United States or
Guam, any credit for an overpayment of in-
come tax to either the United States or
Guam, and any payments of estimated tax
to either Guam or the United States. Pay
any balance of tax due with your tax return.
You may also need to complete Form
5074.
•
You are not liable for filing an income tax
return with, or for paying tax to, Guam for
the tax year.
Form 5074. If you file a U.S. income tax return,
attach a completed Form 5074 if you (and your
spouse if filing a joint return) have:
•
Adjusted gross income of $50,000 or more
for the tax year, and
•
Gross income of $5,000 or more from
sources within Guam.
The United States and Guam use this form
to divide your income taxes.
See the Illustrated Example of Form 5074 in
chapter 5.
De minimis exception to determining
source of income. In certain situations, you
will not have income from a territory. See De
minimis exception under Compensation for La-
bor or Personal Services in chapter 2.
If you are a citizen or resident alien of the
United States but not a bona fide resident of
Guam during the tax year and you are not in-
cluding a check or money order, send your U.S.
tax return and all attachments (including Form
5074) to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments (including Form 5074) to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
Nonresident Alien (Other Than a
Bona Fide Resident of Guam),
Where To File
If you are a nonresident alien of the United
States who does not qualify as a bona fide resi-
dent of Guam for the tax year, you must gener-
ally file the following returns.
•
A Guam tax return reporting only your in-
come from sources within Guam. In this sit-
uation, wages for services performed in
Guam, whether for a private employer, the
U.S. government, or otherwise, are income
from sources within Guam.
•
A U.S. tax return (Form 1040-NR) report-
ing U.S. source income according to the
rules for a nonresident alien. See the In-
structions for Form 1040-NR.
If you are not a bona fide resident of Guam
during the tax year and you are not including a
check or money order, send your U.S. tax re-
turn and all attachments to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
Send your Guam tax return and all attach-
ments to:
Department of Revenue and Taxation
Taxpayer Services Division
P.O. Box 23607
GMF, Guam 96921
Citizen of Guam
If you are a citizen of Guam (meaning that you
were born or naturalized in Guam) but not oth-
erwise a U.S. citizen or a U.S. resident alien
during the tax year, file your income tax return
with Guam. Include income from worldwide
sources on your Guam return. Take into ac-
count tax withheld by both jurisdictions in deter-
mining if there is tax overdue or an overpay-
ment. Pay any balance of tax due with your tax
return.
If you are a citizen of Guam, send your re-
turn and all attachments to:
Department of Revenue and Taxation
Taxpayer Services Division
P.O. Box 23607
GMF, Guam 96921
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Chapter 3 Filing Information for Individuals in Certain U.S. Possessions Page 17
Special Rules for Guam
Special rules apply to certain types of income,
employment, and filing status.
Joint return. If you file a joint return, you
should file your return (and pay the tax) with the
jurisdiction where the spouse who has the
greater adjusted gross income (AGI) would
have to file if you were filing separately. If the
spouse with the greater AGI is a bona fide resi-
dent of Guam during the tax year, file the joint
return with Guam. If the spouse with the greater
AGI is a U.S. citizen or resident alien but not a
bona fide resident of Guam during the tax year,
file the joint return with the United States. For
this purpose, income is determined without re-
gard to community property laws.
Example. Bill Whiting, a U.S. citizen, was a
resident of the United States, and his spouse, a
citizen of both Guam and the United States,
was a bona fide resident of Guam during the tax
year. Bill earned $45,000 as an engineer in the
United States. His spouse earned $15,000 as a
teacher in Guam. Bill and his spouse will file a
joint return. Because Bill has the greater AGI,
he and his spouse must file their return with the
United States and report the entire $60,000 on
that return.
U.S. Armed Forces. If you are a member of
the U.S. Armed Forces on active duty who
qualified as a bona fide resident of Guam in a
prior tax year, your absence from Guam solely
in compliance with military orders will not
change your bona fide residency. If you did not
qualify as a bona fide resident of Guam in a
prior tax year, your presence in Guam solely in
compliance with military orders will not qualify
you as a bona fide resident of Guam.
Civilian spouse of active duty member
of the U.S. Armed Forces. If, under the rule
discussed at the beginning of chapter 1 (see
Special rule for civilian spouse of active duty
member of the U.S. Armed Forces), your tax
residence is Guam, follow the guidance in the
section for bona fide residents under Which Re-
turn To File, earlier. However, if your tax resi-
dence is one of the 50 states or the District of
Columbia and your only income from Guam is
from wages, salaries, tips, or self-employment,
you will be taxed on your worldwide income and
file only a U.S. tax return (Form 1040 or
1040-SR) and a state and/or local tax return, if
required. If you have income from Guam other
than wages, salaries, tips, or self-employment
that is considered to be sourced in that territory
(see Table 2-1), you may need to file Form
5074 with your U.S. tax return.
The spouse of the service member may
elect to use the same residence for tax purpo-
ses as the service member regardless of the
date on which the marriage of the spouse and
service member occurred.
Moving expense deduction. The deduction
for moving expenses is suspended unless you
are a member of the U.S. Armed Forces who
moves pursuant to a military order and incident
to a permanent change of station. For more in-
formation, see Pub. 3. If you meet these re-
quirements, see the discussion below.
Generally, expenses of a move to Guam are
directly attributable to wages, salaries, and
other earned income from Guam. Likewise, the
expenses of a move back to the United States
are generally attributable to U.S. earned in-
come.
If your move was to Guam, report your de-
duction for moving expenses as follows.
•
If you are a bona fide resident in the tax
year of your move, enter your deductible
expenses on your Guam tax return.
•
If you are not a bona fide resident, enter
your deductible expenses on Form 3903,
and enter the deductible amount on
Schedule 1 (Form 1040), line 13, and on
Form 5074, line 20.
If your move was to the United States, com-
plete Form 3903, and enter the deductible
amount on Schedule 1 (Form 1040), line 13.
Self-employment tax. If you have no U.S. fil-
ing requirement, but have income that is effec-
tively connected with a trade or business in
Guam, you must file Form 1040-SS with the
United States to report your self-employment in-
come and, if necessary, pay self-employment
tax.
Additional Medicare Tax. You may be re-
quired to pay Additional Medicare Tax. Also,
you may need to report Additional Medicare
Tax withheld by your employer. For more infor-
mation, see Additional Medicare Tax under
Special Rules for Completing Your U.S. Tax
Return in chapter 4.
Estimated tax payments. To see if you are
required to make payments of estimated in-
come tax, self-employment tax, and/or Addi-
tional Medicare Tax to the IRS, see Form
1040-ES.
Payment of estimated tax. If you must
pay estimated tax, make your payment to the
jurisdiction where you would file your income
tax return if your tax year were to end on the
date your first estimated tax payment is due.
Generally, you should make the rest of your
quarterly payments of estimated tax to the juris-
diction where you made your first payment of
estimated tax. However, estimated tax pay-
ments to either jurisdiction will be treated as
payments to the jurisdiction with which you file
the tax return.
If you make a joint payment of estimated tax,
make your payment to the jurisdiction where the
spouse who has the greater estimated AGI
would have to pay (if a separate payment were
made). For this purpose, income is determined
without regard to community property laws.
Early payment. If you make your first pay-
ment of estimated tax early, follow the rules
given earlier to determine where to send it. If
you send it to the wrong jurisdiction, make all
later payments to the jurisdiction to which the
first payment should have been sent.
To pay by check or money order, send your
payment with the Form 1040-ES payment
voucher to:
Department of Revenue and Taxation
Taxpayer Services Division
P.O. Box 23607
GMF, Guam 96921
To get information on paying electronically
(by credit or debit card, or through the Elec-
tronic Federal Tax Payment System (EFTPS)),
go to IRS.gov/Payments.
For information on making estimated in-
come tax payments to the Department of Reve-
nue and Taxation, see Where To Get Forms
and Information, earlier.
Double Taxation
A mutual agreement procedure exists to settle
cases of double taxation between the United
States and Guam. See Double Taxation in
chapter 4.
The U.S. Virgin Islands
The USVI has its own tax system based on the
same tax laws and tax rates that apply in the
United States. An important factor in USVI taxa-
tion is whether, during the tax year, you are a
bona fide resident of the USVI.
Where To Get Forms and
Information
For information about filing your USVI
tax return or about Form 1040INFO in
St. Thomas, contact:
Virgin Islands Bureau of Internal Revenue
6115 Estate Smith Bay
Suite 225
St. Thomas, USVI 00802
You can order forms and publications
by calling 340-715-1040.
You can order forms and publications
through fax at 340-774-2672.
For information about filing your USVI tax return
or about Form 1040INFO in St. Croix, contact:
Virgin Islands Bureau of Internal Revenue
4008 Estate Diamond Plot 7-B
Christiansted, USVI 00820-4421
You can order forms and publications
by calling 340-773-1040.
You can order forms and publications
through fax at 340-773-1006.
You can access the USVI website at
http://bir.vi.gov/.
The addresses and phone numbers lis-
ted above are subject to change.
CAUTION
!
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Page 18 Chapter 3 Filing Information for Individuals in Certain U.S. Possessions
Which Return To File
In general, bona fide residents of the USVI pay
income taxes only to the USVI. U.S. citizens or
resident aliens (but not bona fide residents of
the USVI) with USVI source income pay a por-
tion of the tax to each jurisdiction.
Bona Fide Resident of the U.S.
Virgin Islands
File your tax return with the USVI if you are a
U.S. citizen, resident alien, or nonresident alien
and a bona fide resident of the USVI during the
tax year.
•
Include your worldwide income on your
USVI return. In determining your total tax
payments, take into account all income tax
withheld and paid to either the USVI or the
United States, any credit for an overpay-
ment of income tax to either the USVI or
the United States, and any payments of
estimated tax to either the USVI or the Uni-
ted States. Pay any balance of tax due with
your tax return. Filing this return with the
USVI generally also starts the statute of
limitations on assessment of your U.S. in-
come tax.
•
You generally do not have to file with the
United States for any tax year in which you
are a bona fide resident of the USVI during
the tax year, provided you report and pay
tax on your income from all sources to the
USVI and identify the source(s) of the in-
come on the return.
•
If you have self-employment income, you
may be required to file Form 1040-SS with
the United States. For more information,
see Self-employment tax under Special
Rules for the U.S. Virgin Islands, later.
Form 1040INFO. If you are a bona fide resi-
dent of the USVI and have non-USVI source in-
come, you must also file Virgin Islands Form
1040INFO, Non-Virgin Islands Source Income
of Virgin Islands Residents, with the U.S. Virgin
Islands. Attach Form 1040INFO to your USVI
tax return before filing. You can get Form
1040INFO by contacting the address or website
given earlier.
If you are a bona fide resident of the USVI
for the tax year, file your return and all attach-
ments with the U.S. Virgin Islands Bureau of In-
ternal Revenue at:
Bureau of Internal Revenue
6115 Estate Smith Bay
St. Thomas, USVI 00802
U.S. Citizen or Resident Alien
(Other Than a Bona Fide Resident
of the U.S. Virgin Islands)
If you are a U.S. citizen or resident alien but not
a bona fide resident of the USVI during the tax
year, you must file your original Form 1040 or
1040-SR with the United States and an identical
copy of that return with the USVI if you have:
•
Income from sources in the USVI, or
•
Income effectively connected with the con-
duct of a trade or business in the USVI.
File your original Form 1040 or 1040-SR
with the United States and file a signed copy of
the U.S. return (including all attachments,
forms, and schedules) with the U.S. Virgin Is-
lands Bureau of Internal Revenue by the due
date for filing Form 1040 or 1040-SR. Use Form
8689 to figure the amount of tax you must pay
to the USVI.
Form 8689. Complete this form and attach it to
both the return you file with the United States
and the copy you file with the USVI. Figure the
amount of tax you must pay to the USVI as fol-
lows:
. .
Total tax on
U.S. return
(after certain
adjustments)
×
USVI AGI
Worldwide AGI
Pay any tax due to the USVI when you file
your return with the U.S. Virgin Islands Bureau
of Internal Revenue. To receive credit on your
U.S. return for taxes paid to the USVI, include
the amounts from Form 8689, lines 40 and 45,
in the total on Form 1040 or 1040-SR, line 19.
On the dotted line next to line 19, enter “Form
8689” and show the amounts.
See the Illustrated Example of Form 8689 in
chapter 5.
De minimis exception to determining
source of income. In certain situations, you
will not have income from a territory. See De
minimis exception under Compensation for La-
bor or Personal Services in chapter 2.
If you are not a bona fide resident of the
USVI during the tax year, but you have USVI
source income, and you are not including a
check or a money order, file Form 1040 or
1040-SR and all attachments (including Form
8689) with the:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments (including Form 8689) to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
File a copy of your U.S. Form 1040 or
1040-SR with the U.S. Virgin Islands Bureau of
Internal Revenue at:
Bureau of Internal Revenue
6115 Estate Smith Bay
St. Thomas, USVI 00802
Nonresident Alien (Other Than a
Bona Fide Resident of the U.S.
Virgin Islands)
If you are a nonresident alien of the United
States who does not qualify as a bona fide resi-
dent of the USVI for the tax year, you must gen-
erally file the following returns.
•
A USVI tax return reporting only your in-
come from sources within the USVI. In this
situation, wages for services performed in
the USVI, whether for a private employer,
the U.S. government, or otherwise, are in-
come from sources within the USVI.
•
A U.S. tax return (Form 1040-NR) report-
ing U.S. source income according to the
rules for a nonresident alien. See the In-
structions for Form 1040-NR.
If you are not a bona fide resident of the
USVI during the tax year, and you are not in-
cluding a check or a money order, send your
U.S. tax return and all attachments (including
Form 8689) to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments (including Form 8689) to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
Send your USVI tax return and all attach-
ments to:
Bureau of Internal Revenue
6115 Estate Smith Bay
St. Thomas, USVI 00802
Special Rules for the U.S.
Virgin Islands
There are some special rules for certain types
of income, employment, and filing status.
Joint return. If you file a joint return, you
should file your return (and pay the tax) with the
jurisdiction where the spouse who has the
greater adjusted gross income (AGI) would
have to file if you were filing separately. If the
spouse with the greater AGI is a bona fide resi-
dent of the USVI during the tax year, file the
joint return with the USVI. If the spouse with the
greater AGI is a U.S. citizen or resident alien of
the United States but not a bona fide resident of
the USVI during the tax year, file the joint return
with the United States. For this purpose, in-
come is determined without regard to commun-
ity property laws.
Example. Marge Birch, a U.S. citizen, was
a resident of the United States, and her spouse,
a citizen of both the USVI and the United
States, was a bona fide resident of the USVI
during the tax year. Marge earned $55,000 as
an architect in the United States. Her spouse
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Chapter 3 Filing Information for Individuals in Certain U.S. Possessions Page 19
earned $30,000 as a librarian in the USVI.
Marge and her spouse will file a joint return. Be-
cause Marge has the greater AGI, she and her
spouse must file their return with the United
States and report the entire $85,000 on that re-
turn.
U.S. Armed Forces. If you are a member of
the U.S. Armed Forces on active duty who
qualified as a bona fide resident of the USVI in a
prior tax year, your absence from the USVI
solely in compliance with military orders will not
change your bona fide residency. If you did not
qualify as a bona fide resident of the USVI in a
prior tax year, your presence in the USVI solely
in compliance with military orders will not qualify
you as a bona fide resident of the USVI.
Civilian spouse of active duty member of
the U.S. Armed Forces. If, under the rule dis-
cussed at the beginning of chapter 1 (see Spe-
cial rule for civilian spouse of active duty mem-
ber of the U.S. Armed Forces), your tax
residence is the USVI, follow the guidance in
Bona Fide Residents of the U.S. Virgin Islands
under Which Return To File, earlier. However, if
your tax residence is one of the 50 states or the
District of Columbia and your only income from
the USVI is from wages, salaries, tips, or
self-employment, you will be taxed on your
worldwide income and file only a U.S. tax return
(Form 1040 or 1040-SR) and a state and/or lo-
cal tax return, if required. If you have income
from the USVI other than wages, salaries, tips,
or self-employment that is considered to be
sourced in that territory (see Table 2-1), you
may need to file Form 8689 with your U.S. tax
return. In this case, follow the guidance under
U.S. Citizen or Resident Alien (Other Than a
Bona Fide Resident of the U.S. Virgin Islands),
earlier.
The spouse of the service member may
elect to use the same residence for tax purpo-
ses as the service member regardless of the
date on which the marriage of the spouse and
service member occurred.
Moving expense deduction. The deduction
for moving expenses is suspended unless you
are a member of the U.S. Armed Forces who
moves pursuant to a military order and incident
to a permanent change of station. For more in-
formation, see Pub. 3. If you meet these re-
quirements, see the discussion below.
Generally, expenses of a move to the USVI
are directly attributable to wages, salaries, and
other earned income from the USVI. Likewise,
the expenses of a move back to the United
States are generally attributable to U.S. earned
income.
If your move was to the USVI, report your
deduction for moving expenses as follows.
•
If you are a bona fide resident in the tax
year of your move, enter your deductible
expenses on your USVI tax return.
•
If you are not a bona fide resident, enter
your deductible expenses on Form 3903,
and enter the deductible amount on
Schedule 1 (Form 1040), line 13, and on
Form 8689, line 20.
If your move was to the United States, com-
plete Form 3903, and enter the deductible
amount on Schedule 1 (Form 1040), line 13.
Self-employment tax. If you have no U.S. fil-
ing requirement, but have income that is effec-
tively connected with a trade or business in the
USVI, you must file Form 1040-SS with the Uni-
ted States to report your self-employment in-
come and, if necessary, pay self-employment
tax.
Additional Medicare Tax. You may be re-
quired to pay Additional Medicare Tax. Also,
you may need to report Additional Medicare
Tax withheld by your employer. For more infor-
mation, see Additional Medicare Tax under
Special Rules for Completing Your U.S. Tax
Return in chapter 4.
Estimated tax payments. To see if you are
required to make payments of estimated in-
come tax, self-employment tax, and/or Addi-
tional Medicare Tax to the IRS, get Form
1040-ES.
To pay by check or money order, send your
payment with the Form 1040-ES payment
voucher to:
Bureau of Internal Revenue
6115 Estate Smith Bay
St. Thomas, USVI 00802
To get information on paying electronically
(by credit or debit card, or through the Elec-
tronic Federal Tax Payment System (EFTPS)),
go to IRS.gov/Payments.
For information on making estimated in-
come tax payments to the Bureau of Internal
Revenue, see Where To Get Forms and Infor-
mation, earlier.
Extension of time to file. You can get an au-
tomatic 6-month extension of time to file your
tax return. See Extension of Time To File in
chapter 4. Bona fide residents of the USVI dur-
ing the tax year must file a paper Form 4868
with the U.S. Virgin Islands Bureau of Internal
Revenue. Nonresidents of the USVI should file
separate extension requests with the IRS and
the U.S. Virgin Islands Bureau of Internal Reve-
nue and make any payments due to the respec-
tive jurisdictions. However, the U.S. Virgin Is-
lands Bureau of Internal Revenue will honor an
extension request that is timely filed with the
IRS.
Double Taxation
A mutual agreement procedure exists to settle
cases of double taxation between the United
States and the U.S. Virgin Islands. See Double
Taxation in chapter 4.
4.
Filing U.S. Tax
Returns
The information in chapter 3 will tell you if a U.S.
income tax return is required for your situation.
If a U.S. return is required, your next step is to
see if you meet the filing requirements. If you do
meet the filing requirements, the information
presented in this chapter will help you under-
stand the special procedures involved. This
chapter discusses:
•
Filing requirements,
•
When to file your return,
•
Where to send your return,
•
How to adjust your deductions and credits
if you are excluding income from American
Samoa or Puerto Rico,
•
How to make estimated tax payments and
pay self-employment tax, and
•
How to request assistance in resolving in-
stances of double taxation.
Who Must File
If you are not required to file a territory tax return
that includes your worldwide income, you must
generally file a Form 1040 or 1040-SR U.S. in-
come tax return if your gross income is at least
the amount shown in Table 4-1, for your filing
status and age. Use the Instructions for Forms
1040 and 1040-SR to help you complete Form
1040 or 1040-SR.
As discussed in chapter 3, bona fide resi-
dents of the CNMI, Guam, and the U.S. Virgin
Islands do not generally have an income tax fil-
ing requirement with the IRS. Bona fide resi-
dents of American Samoa and Puerto Rico may
have to file an income tax return with the IRS,
the territory tax department, or both, as dis-
cussed in chapter 3. These individuals will have
to file an income tax return with the IRS if they
have income that is sourced outside the terri-
tory in an amount that exceeds U.S. filing re-
quirements.
Some individuals (such as those who can be
claimed as a dependent on another person's re-
turn or who owe certain taxes, such as self-em-
ployment tax) must file a tax return even though
the gross income is less than the amount
shown in Table 4-1 for their filing status and
age. For more information, see the Instructions
for Forms 1040 and 1040-SR.
Filing Requirement for U.S.
Income Tax Return if
Territory Income Is Excluded
Bona fide residents of American Samoa or Pu-
erto Rico are required to file a U.S. income tax
return if they have gross income subject to U.S.
income tax in an amount that equals or exceeds
the applicable filing requirement. The filing re-
quirement is generally based on the standard
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Page 20 Chapter 4 Filing U.S. Tax Returns
deduction amount used to file a U.S. income tax
return shown in Table 4-1.
You must adjust the standard deduction
amount based on the percentage of gross in-
come subject to U.S. income tax over gross in-
come from all sources (including excluded terri-
tory income) to determine whether you meet the
filing requirement for a U.S. income tax return.
To make this determination, follow the instruc-
tions and examples below.
Standard deduction amount. For 2020, the
standard deduction amounts for all taxpayers
are:
Single or Married filing
separately
$12,400
Head of household $18,650
Married filing jointly or
Qualifying widow(er)
$24,800
If you or your spouse was born before Janu-
ary 2, 1956, or either of you is blind, figure your
standard deduction using the Standard Deduc-
tion Chart for People Who Were Born Before
January 2, 1956, or Were Blind in the Instruc-
tions for Forms 1040 and 1040-SR.
Allowable standard deduction. Unless your
filing status is married filing separately, or mar-
ried filing jointly but you did not live with your
spouse at the end of 2020 (or on the date your
spouse died), the minimum income level at
which you must file a return is generally based
on the standard deduction for your filing status
and age. Because the standard deduction ap-
plies to all types of income, it must be divided
between your excluded income and income
from other sources. Multiply the regular stand-
ard deduction for your filing status and age by
the following fraction:
Gross income subject to U.S. income
tax
Gross income from all sources
(including excluded territory income)
Example. Barbara Spruce, a U.S. citizen, is
single, under 65, and a bona fide resident of
American Samoa. During 2020, she received
$20,000 of income from American Samoa sour-
ces (qualifies for exclusion) and $8,000 of in-
come from sources outside the territory (subject
to U.S. income tax). Her allowable standard de-
duction for 2020 is figured as follows:
. .
$8,000
$28,000
×
$12,400
(regular
standard
deduction)
= $3,543
Table 4-1. 2020 Filing Requirements Chart for Most Taxpayers
IF your filing status is... AND at the end of 2020 you were
*
...
THEN file a return if your gross income
**
was at least...
Single under 65 $12,400
65 or older $14,050
Married filing jointly
***
under 65 (both spouses) $24,800
65 or older (one spouse) $26,100
65 or older (both spouses) $27,400
Married filing separately any age $5
Head of household under 65 $18,650
65 or older $20,300
Qualifying widow(er) under 65 $24,800
65 or older $26,100
* If you were born on January 1, 1956, you are considered to be age 65 at the end of 2020. (If your spouse died in 2020 or if you are preparing a return for
someone who died in 2020, see Pub. 501.)
** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from
sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Do not include social security benefits unless
(a) you are married filing a separate return and you lived with your spouse at any time during 2020, or (b) one-half of your social security benefits plus your
other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). If (a) or (b) applies, see the Instructions for Forms
1040 and 1040-SR or Pub. 915 to figure the taxable part of social security benefits you must include in gross income. Gross income includes gains, but not
losses, reported on Form 8949 or Schedule D. Gross income from a business means, for example, the amount on Schedule C, line 7, or Schedule F, line 9.
But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C, line 7, or Schedule F, line 9.
*** If you did not live with your spouse at the end of 2020 (or on the date your spouse died) and your gross income was at least $5, you must file a return
regardless of your age.
Example 1. James and Joan Thompson,
one over 65, are U.S. citizens and bona fide
residents of Puerto Rico during the tax year.
They file a joint income tax return. During 2020,
they received $35,000 of income from Puerto
Rico sources (qualifies for exclusion) and
$6,000 of income from sources outside Puerto
Rico (subject to U.S. income tax). Their allowa-
ble standard deduction for 2020 is figured as
follows:
$6,000
$41,000
×
$26,100
(standard
deduction
for 65 or
older (one
spouse))
= $3,820
The Thompsons have to file a U.S. income tax
return because their gross income subject to
U.S. tax ($6,000) is more than their allowable
standard deduction. ($6,000 – $3,761 =
$2,180).
Example 2. Barbara Spruce (see Example
under Allowable standard deduction, earlier)
must file a U.S. income tax return because her
gross income subject to U.S. tax ($8,000) is
more than her allowable standard deduction
($3,543).
If you must file a U.S. income tax re-
turn, you may be able to file electroni-
cally using IRS.gov/Efile. See the In-
structions for Forms 1040 and 1040-SR or visit
IRS.gov.
TIP
When To File
If you file on a calendar year basis, the due date
for filing your U.S. income tax return is April 15
following the end of your tax year. If you use a
fiscal year (a year ending on the last day of a
month other than December), the due date is
the 15th day of the 4th month after the end of
your fiscal year. If any due date falls on a Satur-
day, Sunday, or legal holiday, your tax return is
due on the next business day.
For your 2020 tax return, the due date is
April 15, 2021.
If you mail your federal tax return, it is con-
sidered timely if it bears an official postmark
dated on or before the due date, including any
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Chapter 4 Filing U.S. Tax Returns Page 21
extensions. If you use a private delivery service
designated by the IRS, generally the postmark
date is the date the private delivery service re-
cords in its database or marks on the mailing la-
bel. Go to IRS.gov/PDS for the current list of
designated private delivery services.
Extension of Time To File
You can get an extension of time to file your
U.S. income tax return. Special rules apply for
those living outside the United States.
Automatic 6-Month Extension
If you cannot file your 2020 return by the due
date, you can get an automatic 6-month exten-
sion of time to file.
Example. If your return must be filed by
April 15, 2021, you will have until October 15,
2021, to file.
Although you are not required to make
a payment of the tax you estimate as
due, Form 4868 does not extend the
time to pay taxes. If you do not pay the amount
due by the regular due date (generally, April
15), you will owe interest on any unpaid tax
from the original due date to the date you pay
the tax. You may also be charged penalties
(see Form 4868).
How to get the automatic extension. You
can get the automatic 6-month extension if you
do one of the following by the due date for filing
your return.
•
E-file Form 4868 using your personal com-
puter or a tax professional.
•
E-file and pay by credit or debit card. Your
payment must be at least $1. You may pay
by phone or over the Internet. Do not file
Form 4868.
•
File a paper Form 4868. If you are a fiscal
year taxpayer, you must file a paper Form
4868.
See Form 4868 for information on getting an
extension using these options.
When to file. You must request the automatic
extension by the due date for your return. You
can file your return any time before the 6-month
extension period ends.
When you file your return. Enter any pay-
ment you made related to the extension of time
to file on Schedule 3 (Form 1040), line 10.
You cannot ask the IRS to figure your
tax if you use the extension of time to
file.
Individuals Outside the United
States and Puerto Rico
You are allowed an automatic 2-month exten-
sion (until June 15, 2021, if you use the calen-
dar year) to file your 2020 return and pay any
federal income tax due if:
1. You are a U.S. citizen or resident; and
2. On the due date of your return:
CAUTION
!
TIP
a. You are living outside of the United
States and Puerto Rico, and your
main place of business or post of duty
is outside the United States and Pu-
erto Rico; or
b. You are in military or naval service on
duty outside the United States and
Puerto Rico.
However, if you pay the tax due after the
regular due date (generally, April 15), interest
will be charged from April 15 until the date the
tax is paid.
If you serve in a combat zone or qualified
hazardous duty area, you may be eligible for a
longer extension of time to file. For more infor-
mation, see Pub. 3.
Married taxpayers. If you file a joint return,
only one spouse has to qualify for this auto-
matic extension. However, if you and your
spouse file separate returns, this automatic ex-
tension applies only to the spouse who quali-
fies.
How to get the extension. To use this special
automatic extension, you must attach a state-
ment to your return explaining what situation
qualified you for the extension. (See the situa-
tions listed in item 2 in the list above.)
Extension beyond 2 months. If you cannot
file your 2020 return within the automatic
2-month extension period, you can get an addi-
tional 4-month extension, for a total of 6
months. File Form 4868 by the end of the auto-
matic extension period (June 15, 2021, for cal-
endar year taxpayers). Be sure to check the box
on Form 4868, line 8, if appropriate.
Extension beyond 6 months. In addition
to this 6-month extension, taxpayers who are
out of the country (as defined in item 2 in the list
above) can request a discretionary 2-month ad-
ditional extension of time to file their returns (to
December 15, 2021, for calendar year taxpay-
ers).
To request this extension, you must send
the IRS a letter explaining the reasons why you
need the additional 2 months. Send the letter by
the extended due date (October 15 for calendar
year taxpayers) to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
You will not receive any notification from the
IRS unless your request is denied for being un-
timely.
Taxpayers Affected by Federally
Declared Disasters
To find information on the most recent tax relief
provisions for taxpayers affected by disaster sit-
uations see Tax Relief in Disaster Situations.
See Pub. 547 for discussions on the special
rules that apply to federally declared disaster
areas.
Where To File
Use the addresses listed below if you have to
file Form 1040 or 1040-SR with the United
States and you are excluding territory income
from American Samoa or Puerto Rico.
If you are not including a check or a money
order, send your U.S. tax return and all attach-
ments to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
If you are including a check or a money or-
der, send your U.S. tax return and all attach-
ments to:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
Send your U.S. return to these ad-
dresses if you are attaching Form 5074
or Form 8689. If you are not in either of
the above categories, send your return to the
address shown in the Instructions for Forms
1040 and 1040-SR for the territory or state in
which you reside.
Special Rules for
Completing Your U.S.
Tax Return
The following rules may apply if you are re-
quired to file a U.S. federal income tax return.
Earned income credit. If you are not exclud-
ing territory income from your U.S. tax return,
follow the Instructions for Forms 1040 and
1040-SR. However, you may not qualify to
claim the earned income credit (EIC).
Even if you maintain a household in one of
the territories discussed in this publication that
is your main home and the home of your quali-
fying child, you cannot claim the EIC on your
U.S. tax return. This credit is available only if
you maintain the household in the United States
or you are serving on extended active duty in
the U.S. Armed Forces.
U.S. Armed Forces. U.S. military person-
nel stationed outside the United States on ex-
tended active duty are considered to live in the
United States during that duty period for purpo-
ses of the EIC. Extended active duty means you
are called or ordered to duty for an indefinite
period or for a period of more than 90 days.
Once you begin serving your extended active
duty, you are still considered to have been on
extended active duty even if you do not serve
more than 90 days.
Income from American Samoa or Puerto
Rico excluded. You will not be allowed to take
deductions and credits that apply to the
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Page 22 Chapter 4 Filing U.S. Tax Returns
excluded income. The additional information
you need follows.
Deductions if Territory
Income Is Excluded
Deductions that specifically apply to your exclu-
ded territory income are not allowable on your
U.S. income tax return.
Deductions that do not specifically apply to
any particular type of income must be divided
between your excluded income from sources in
the relevant territory and income from all other
sources to find the part that you can deduct on
your U.S. tax return. Examples of such deduc-
tions are alimony payments, the standard de-
duction, and certain itemized deductions (such
as medical expenses, charitable contributions,
real estate taxes, and mortgage interest on your
home).
Note. Under section 11051 of P.L. 115-97
(TCJA), alimony payments are no longer de-
ductible if the divorce or separation agreement
is executed after December 31, 2018, or if exe-
cuted before January 1, 2019, but modified af-
ter December 31, 2018, the modification must
state that section 11051 of P.L. 115-97 applies
to the modification.
Figuring the deduction. To find the part of a
deduction that is allowable, multiply the deduc-
tion by the following fraction:
Gross income subject to U.S. income
tax
Gross income from all sources
(including excluded territory income)
Adjustments to Income
Your adjusted gross income equals your gross
income minus certain deductions (adjust-
ments).
Moving expense deduction. The deduction
for moving expenses is suspended unless you
are a member of the U.S. Armed Forces who
moves pursuant to a military order and incident
to a permanent change of station. For more in-
formation, see the separate discussions of the
moving expense deduction for each territory in
chapter 3.
Self-employment tax deduction. Generally, if
you are reporting self-employment income on
your U.S. return, you can include the deductible
part of your self-employment tax on Schedule 1
(Form 1040), line 14. This is an income tax de-
duction only; it is not a deduction in figuring net
earnings from self-employment (for self-em-
ployment tax).
However, if you are a bona fide resident of
American Samoa or Puerto Rico and you ex-
clude all of your self-employment income from
gross income, you cannot take the deduction on
Schedule 1 (Form 1040), line 14, because the
deduction is related to excluded income.
If only part of your self-employment income
is excluded, the part of the deduction that is
based on the nonexcluded income is allowed.
This would happen if, for instance, you have
two businesses and only the income from one
of them is excludable.
For purposes of the deduction only, figure
the self-employment tax on the nonexcluded in-
come by multiplying your total self-employment
tax (from Schedule SE (Form 1040)) by the fol-
lowing fraction:
Self-employment income
subject to U.S. income tax
Total self-employment income
(including excluded territory income)
The result is your self-employment tax on non-
excluded income. Include the deductible part of
this amount on Schedule 1 (Form 1040),
line 14.
Individual retirement arrangement (IRA) de-
duction. Do not take excluded income into ac-
count when figuring your deductible IRA contri-
bution.
Standard Deduction
Disaster tax relief. If you are allowed to claim
the standard deduction, and you had a net
qualified disaster loss resulting from certain fed-
erally declared disasters (see IRS.gov/
DisasterTaxRelief), you can elect to increase
your standard deduction by the amount of your
net qualified disaster loss. You must report your
increased standard deduction on Schedule A
(Form 1040).
To figure your net qualified disaster loss,
see Form 4684 and its instructions. For more in-
formation on how to report the increased stand-
ard deduction, see the instructions for line 16 of
Schedule A (Form 1040) in the Instructions for
Schedule A (Form 1040).
The standard deduction is composed of the
regular standard deduction amount and the ad-
ditional standard deduction for taxpayers who
are blind or age 65 or over.
To find the amount you can claim on Form
1040 or 1040-SR, line 12, first figure your full
standard deduction according to the Instruc-
tions for Forms 1040 and 1040-SR. Then multi-
ply your full standard deduction by the following
fraction:
Gross income subject to U.S. income
tax
Gross income from all sources
(including excluded territory income)
In the space above line 9, enter “Standard
deduction modified due to income excluded un-
der section 931 (if American Samoa) or section
933 (if Puerto Rico).”
This calculation may not be the same
as the one you used to determine if you
need to file a U.S. tax return.
CAUTION
!
Itemized Deductions
Disaster tax relief. If you had a net qualified
disaster loss resulting from certain federally de-
clared disasters (see IRS.gov/
DisasterTaxRelief), you may be allowed to
claim the net qualified disaster loss on Sched-
ule A (Form 1040). Also, if certain requirements
are met, you may be able to make an election to
deduct the loss in 2019.
To figure your net qualified disaster loss,
see Form 4684 and its instructions. For more in-
formation on how to report a net qualified disas-
ter loss as an itemized deduction, see the
Instructions for Schedule A (Form 1040).
Most itemized deductions do not apply to a par-
ticular type of income. However, itemized de-
ductions can be divided into three categories.
•
Those that apply specifically to excluded
income are not deductible.
•
Those that apply specifically to income
subject to U.S. income tax are fully allowa-
ble under the Instructions for Schedule A
(Form 1040).
•
Those that do not apply to specific income
must be allocated between your gross in-
come subject to U.S. income tax and your
total gross income from all sources.
The example given later shows how to figure
the deductible part of each type of expense that
is not related to specific income.
Example. In 2020, you and your spouse
are both under 65 and U.S. citizens who are
bona fide residents of Puerto Rico during the
tax year. You file a joint income tax return. Dur-
ing 2020, you earned $24,000 from Puerto Rico
sources (excluded from U.S. gross income) and
your spouse earned $96,000 from the U.S. gov-
ernment. You have $42,250 of itemized deduc-
tions that do not apply to any specific type of in-
come. These are medical expenses of $11,000,
real estate taxes of $10,000, home mortgage in-
terest of $16,250, and charitable contributions
of $5,000 (cash contributions). You determine
the amount of each deduction that you can
claim on your Schedule A (Form 1040), Item-
ized Deductions, by multiplying the deduction
by the fraction shown under Figuring the deduc-
tion, earlier, under Deductions if Territory In-
come Is Excluded.
Medical Expenses
$96,000
$120,000
× $11,000 =
$8,800
(enter on line 1
of Schedule A)
. .
Real Estate Taxes
$96,000
$120,000
× $10,000 =
$8,000
(enter on line 5b
of Schedule A)
. .
Home Mortgage Interest
$96,000
$120,000
× $16,250 =
$13,000
(enter on
line 8a of
Schedule A)
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Chapter 4 Filing U.S. Tax Returns Page 23
. .
Charitable Contributions (cash
contributions)
$96,000
$120,000
× $5,000 =
$4,000
(enter on line 11
of Schedule A)
Enter on Schedule A (Form 1040) only the
allowable portion of each deduction.
Foreign Tax Credit if
Territory Income Is Excluded
If you must report American Samoa or Puerto
Rico source income on your U.S. tax return, you
can claim a foreign tax credit for income taxes
paid to the territory on that income. However,
you cannot claim a foreign tax credit for taxes
paid on territory income that is excluded on your
U.S. tax return. The foreign tax credit is gener-
ally figured on Form 1116.
If you have income, such as U.S. govern-
ment wages, that is not excludable, and you
also have territory source income that is exclud-
able, you must figure the credit by reducing
your foreign taxes paid or accrued by the taxes
based on the excluded income. You make this
reduction for each separate income category.
To find the amount of this reduction, use the fol-
lowing formula for each income category.
Excluded income
from territory
sources less
deductible expenses
based on that income
x
Tax paid
or accrued
to the
territory
=
Reduction
in foreign
taxes
Total income
subject to territory
tax less deductible
expenses based on
that income
Enter the amount of the reduction on Form
1116, line 12.
For more information on the foreign tax
credit, see Pub. 514.
Example. Jason and Lynn Reddy (both un-
der 65) are U.S. citizens who were bona fide
residents of Puerto Rico during all of 2020.
They file a joint tax return. The following table
shows their excludable and taxable income for
U.S. federal income tax purposes.
Taxable Excludable
Jason's wages from
U.S.
government ......$25,000
Lynn's wages from
Puerto Rico
corp. ............ $15,000
Dividend from Puerto
Rico corp. doing
business in Puerto
Rico ............ 200
Dividend from U.S.
corp. doing
business
in U.S.* .........
1,000
Totals ......... $26,000 $15,200
* Income from sources outside Puerto Rico is
taxable.
Jason and Lynn must file 2020 income tax
returns with both Puerto Rico and the United
States. They have gross income of $26,000 for
U.S. tax purposes. They paid taxes to Puerto
Rico of $4,000 ($3,980 on their wages and $20
on the dividend from the Puerto Rico corpora-
tion). They figure their foreign tax credit on two
Forms 1116, which they must attach to their
U.S. return. They fill out one Form 1116 for wa-
ges (general category income) and one Form
1116 for the dividend (passive category in-
come). Jason and Lynn figure the Puerto Rico
taxes on excluded income as follows.
Wages:
($15,000 ÷
$40,000) × $3,980 = $1,493
Dividend: ($200 ÷
$200) × $20 = $20
They enter $1,493 on Form 1116, line 12,
for wages and $20 on the second Form 1116,
line 12, for the dividend.
Self-Employment Tax
Self-employment tax includes both social secur-
ity and Medicare taxes for individuals who are
self-employed.
A U.S. citizen or resident alien who is
self-employed must pay self-employment tax to
the IRS on net self-employment earnings of
$400 or more. This rule applies whether or not
the earnings are excludable from gross income
(or whether or not a U.S. income tax return must
otherwise be filed). Bona fide residents of the
territories discussed in this publication are con-
sidered U.S. residents for this purpose and are
subject to the self-employment tax.
Coronavirus tax relief. See Form 1040-SS
and its instructions regarding coronavirus tax
relief provisions applicable to filers of Form
1040-SS.
Forms to file. If you have net self-employment
income and are subject to self-employment tax,
file one of the following with the United States.
•
If you are required to file Form 1040 or
1040-SR with the United States, complete
Schedule SE (Form 1040) and attach it to
your Form 1040 or 1040-SR.
•
If you are not required to file Form 1040 or
1040-SR with the United States and you
are a bona fide resident of American Sa-
moa, the CNMI, Guam, Puerto Rico, or the
USVI, file Form 1040-SS. If you are a resi-
dent of Puerto Rico, you can file the Span-
ish-language Form 1040-PR instead. Do
not file Form 1040-SS or 1040-PR with
Form 1040 or 1040-SR.
•
If you are required to pay Additional Medi-
care Tax (discussed later) on your self-em-
ployment income, attach Form 8959 to
Form 1040, Form 1040-SR, Form
1040-SS, or Form 1040-PR, as applicable.
Chapter 11 bankruptcy cases. While you are
a debtor in a chapter 11 bankruptcy case, your
net profit or loss from self-employment will be
included on the Form 1041 (income tax return)
of the bankruptcy estate. However, you—not
the bankruptcy estate—are responsible for pay-
ing self-employment tax on your net earnings
from self-employment.
Use Schedule SE (Form 1040), Form
1040-SS, or Form 1040-PR, as determined
above, to figure your correct amount of self-em-
ployment tax.
For other reporting requirements, see Chap-
ter 11 Bankruptcy Cases in the Instructions for
Forms 1040 and 1040-SR.
Additional Medicare Tax
A 0.9% Additional Medicare Tax applies to
Medicare wages, railroad retirement (RRTA)
compensation, and self-employment income
that are more than $125,000 if married filing
separately; $250,000 if married filing jointly; or
$200,000 if single, head of household, or quali-
fying widow(er).
Medicare wages and self-employment in-
come are combined to determine if income ex-
ceeds the threshold. A self-employment loss
should not be considered for purposes of this
tax. RRTA compensation should be separately
compared to the threshold.
Your employer is responsible for withholding
the 0.9% Additional Medicare Tax on Medicare
wages or RRTA compensation it pays to you in
excess of $200,000. You should consider this
withholding, if applicable, in determining
whether you need to make estimated tax pay-
ments.
There are no special rules for U.S. citizens
and nonresident aliens living abroad for purpo-
ses of this provision. Wages, RRTA compensa-
tion, and self-employment income that are sub-
ject to Medicare tax will also be subject to
Additional Medicare Tax if in excess of the ap-
plicable threshold.
For more information, see Form 8959 and its
instructions, or visit IRS.gov/ADMT.
You cannot include the Additional Med-
icare Tax as a deductible part of your
self-employment tax.
Net Investment Income Tax
The Net Investment Income Tax (NIIT) imposes
a 3.8% tax on the lesser of an individual’s net
CAUTION
!
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Page 24 Chapter 4 Filing U.S. Tax Returns
investment income or the excess of the individ-
ual’s modified adjusted gross income over a
specified threshold amount. Bona fide residents
of Puerto Rico and American Samoa who may
have a federal income tax return filing obligation
may be liable for the NIIT if the taxpayer’s modi-
fied adjusted gross income from non-territory
sources exceeds a specified threshold amount.
The NIIT does not apply to any individual who is
a nonresident alien with respect to the United
States. Bona fide residents must take into ac-
count any additional tax liability associated with
the NIIT when calculating the estimated tax
payments. If you are a bona fide resident of the
CNMI, Guam, or the USVI, you are not subject
to NIIT.
Forms to file. If you are a bona fide resident of
American Samoa or Puerto Rico and you are
required to pay the NIIT, you must file Form
1040 or 1040-SR with the United States and at-
tach Form 8960. For more information, see
Form 8960 and its instructions.
Paying Your Taxes
You may find that not all of your income tax has
been paid through withholding to either the Uni-
ted States or the territory. This is often true if
you have income that is not subject to withhold-
ing, such as self-employment, interest, or rental
income. In this situation, you may need to make
estimated tax payments.
Estimated Tax
If your estimated income tax obligation is to the
United States, use the worksheet in Form
1040-ES to figure your estimated tax, including
self-employment tax. Include the Additional
Medicare Tax and Net Investment Income Tax,
if applicable. If you are paying by check or
money order, use the payment vouchers in the
Form 1040-ES, or you can make your payments
electronically and not have to file any paper
forms. See Form 1040-ES for information on
making payments.
Double Taxation
Mutual agreement procedures exist to settle is-
sues where there is inconsistent tax treatment
between the IRS and the taxing authorities of
the following territories.
•
American Samoa.
•
The Commonwealth of Puerto Rico.
•
The Commonwealth of the Northern Ma-
riana Islands.
•
Guam.
•
The U.S. Virgin Islands.
These issues usually involve allocations of
income, deductions, credits, or allowances be-
tween related persons; determinations of resi-
dency; and determinations of the source of in-
come and related expenses.
Competent Authority
Assistance
The tax coordination agreements between the
United States and the territory tax departments
contain provisions allowing the competent au-
thorities of the United States and the relevant
territory to resolve, by mutual agreement, incon-
sistent tax treatment by the two jurisdictions.
How to make your request. Your request for
competent authority assistance must be in the
form of a letter addressed to the Deputy Com-
missioner (International) Large Business & In-
ternational Division. It must contain a statement
that competent authority assistance is reques-
ted under the mutual agreement procedure with
the territory. You (or a person having authority
to sign your federal return) must sign and date
the request. For more information, see Revenue
Procedure 2006-23, available at IRS.gov/irb/
2006-20_IRB#RP-2006-23.
Go to IRS.gov/Individuals/International-
Taxpayers/Competent-Authority-Arrangements
for information on the Competent Authority Ar-
rangements for the territories.
Revenue Procedure 2015-40 includes
procedures for requests for assistance
from the U.S. competent authority aris-
ing under U.S. tax treaties. Procedures for re-
questing assistance of the U.S. competent au-
thority in addressing inconsistencies in tax
treatment by the IRS and a U.S. territory are un-
der Revenue Procedure 2006-23, available at
IRS.gov/irb/2006-20_IRB#RP-2006-23.
Nonresident aliens must generally
present their initial request for assis-
tance to the relevant territory tax
agency.
Send your written request for U.S. as-
sistance under this procedure to:
Commissioner, Large Business
and International Division
Internal Revenue Service
SE:LB:TTPO:TA:TAIT:NCA 570-03
1111 Constitution Avenue NW
Washington, DC 20224
(Attention: TAIT)
Credit or Refund
In addition to the tax assistance request, if you
seek a credit or refund of any overpayment of
U.S. tax paid on the income in question, you
should file a claim on Form 1040-X. Indicate on
the form that a request for assistance under the
mutual agreement procedure with the territory
has been filed. Attach a copy of the request to
the form.
Also, you should take whatever steps must
be taken under the territory tax code to prevent
the expiration of the statutory period for filing a
claim for credit or refund of a territory tax.
See Revenue Procedure 2006-23 (or its
successor), section 9, for complete information
TIP
CAUTION
!
on protective measures involving inconsisten-
cies in tax treatment by the IRS and a U.S. terri-
tory, available at IRS.gov/irb/
2006-20_IRB#RP-2006-23. For additional infor-
mation on protective claims related to requests
for assistance arising under U.S. tax treaties,
see Revenue Procedure 2015-40, available at
IRS.gov/irb/2015-35_IRB#RP-2015-40.
5.
Illustrated
Examples
Use the following examples to help you com-
plete the correct attachment to your Form 1040
or 1040-SR. The completed form for each ex-
ample is shown on the pages that follow.
Illustrated Example of
Form 4563
John Black is a U.S. citizen, single, and under
65. He was a bona fide resident of American
Samoa during all of 2020. John received
$13,100 from the rental of a condominium he
owns in Florida, $24,000 of wages from a Sa-
moa Products Company for services performed
in American Samoa, $220 in dividends from an
American Samoa corporation, and $1,000 of
dividends from U.S. corporations. John must
file Form 1040 because his gross income from
U.S. sources is $14,100 ($13,100 rental income
and $1,000 of dividends), which is more than
his filing requirement for single filers under 65
($12,400). (See Filing Requirement for U.S. In-
come Tax Return if Territory Income Is Exclu-
ded in chapter 4.)
John files Form 1040 (not illustrated) instead
of Form 1040-SR as he is under 65. He fills out
Form 4563 to determine the amount of income
from American Samoa he can exclude. See
Bona Fide Resident of American Samoa in
chapter 3.
Completing Form 4563. John enters his
name and social security number at the top of
the form.
Line 1. On Form 4563 (see later), John en-
ters the date his bona fide residence began in
American Samoa, June 2, 2019. Because he is
still a bona fide resident, he enters “not ended”
in the second blank space.
Line 2. He checks the box labeled “Rented
house or apartment” to describe his type of liv-
ing quarters in American Samoa.
Lines 3a and 3b. He checks “No” on
line 3a because no family members lived with
him. He leaves line 3b blank.
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Chapter 5 Illustrated Examples Page 25
Lines 4a and 4b. He checks “Yes” on
line 4a because he owns a rental property out-
side American Samoa (Florida), which he rents
to an unrelated individual. He enters the rele-
vant information on line 4b.
Line 5. He enters the name and address of
his employer, Samoa Products Co. It is a pri-
vate American Samoa corporation.
Line 6. He enters the dates of his 2-week
vacation to New Zealand from November 11 to
November 25. That was his only trip outside
American Samoa during the year.
Line 7. He enters the $24,000 in wages he
received from Samoa Products Co.
Line 9. He received $220 in dividends from
an American Samoa corporation, which he en-
ters here. He also received $1,000 of dividends
from a U.S. corporation, but he will enter that
amount only on his Form 1040 because the
U.S. dividends do not qualify for the territory ex-
clusion.
Line 12. John received $13,100 in rental in-
come from his condominium in Florida, but he
will enter that amount only on his Form 1040
because the rental income does not qualify for
the territory exclusion.
Line 15. John totals the amounts on lines 7
and 9 to get the amount he can exclude from
his gross income in 2020. He will not enter his
excluded income on Form 1040. However, he
will attach his completed Form 4563 to his Form
1040.
Illustrated Example of
Form 5074
Tracy Grey is a U.S. citizen who is a self-em-
ployed fisheries consultant with a tax home in
New York. Her only income for 2020 was net
self-employment income of $80,000. Of the
$80,000, $20,000 was from consulting work in
Guam and the rest was earned in the United
States. Thinking she would owe income tax to
Guam on the $20,000, Tracy made estimated
tax payments of $1,409 to Guam. She was not
a bona fide resident of Guam during 2020.
Tracy completes Form 1040 or 1040-SR
(not illustrated), reporting her worldwide in-
come. Because the adjusted gross income on
her Form 1040 or 1040-SR was $50,000 or
more and at least $5,000 of her gross income is
from Guam, Tracy must file Form 5074 with her
Form 1040 or 1040-SR. All amounts reported
on Form 5074 are also reported on her Form
1040 or 1040-SR. See U.S. Citizen or Resident
Alien (Other Than a Bona Fide Resident of
Guam) in chapter 3.
Completing Form 5074. Tracy enters her
name and social security number at the top of
the form.
Part I. On Form 5074 (see later), Tracy en-
ters her self-employment income from Guam
($20,000) on line 6. She has no other income
from Guam, so the total on line 16 is $20,000.
Part II. Tracy's only adjustment in Part II is
the deductible part of the self-employment tax
on her net income earned in Guam. She enters
$1,413 on line 21 and line 29. Her adjusted
gross income on line 30 is $18,587.
Part III. Tracy made estimated tax pay-
ments of $1,409. She enters this amount on
line 31, and again on line 35 as the total pay-
ments.
Illustrated Example of
Form 8689
Juan and Carla Moreno live and work in the
United States. In 2020, they received $14,400
in income from the rental of a condominium
they own in the USVI. The rental income was
deposited in a bank in the USVI and they re-
ceived $500 of interest on this income. They
were not bona fide residents of the USVI during
the tax year.
The Morenos complete Form 1040 (not illus-
trated) instead of Form 1040-SR as they are
both under 65. They report their income from all
sources, including their interest income and the
income and expenses from their USVI rental
property (reported on Schedule E (Form 1040)).
The Morenos take the standard deduction for
married filing jointly, both under 65, and they
have no dependents.
The Morenos also complete Form 8689 to
determine how much of their U.S. tax shown on
Form 1040, line 16 (with certain adjustments),
must be paid to the USVI. See U.S. Citizen or
Resident Alien (Other Than a Bona Fide Resi-
dent of the U.S. Virgin Islands) in chapter 3.
The Morenos file their Form 1040, attaching
Form 8689 and all other schedules, with the
IRS.
At the same time, they send a copy of their
Form 1040 with all attachments, including Form
8689, to the U.S. Virgin Islands Bureau of Inter-
nal Revenue. The U.S. Virgin Islands Bureau of
Internal Revenue will process this copy.
Completing Form 8689. Juan and Carla enter
their names and Juan's social security number
at the top of the form.
Part I. The Morenos enter their income
from the USVI in Part I (see later). The interest
income is entered on line 2 and the net rental
income of $6,200 ($14,400 of rental income mi-
nus $8,200 of rental expenses) is entered on
line 11. The Morenos' total USVI income of
$6,700 is entered on line 16.
Part II. The Morenos have no adjustments
to their USVI income, so they enter zero (-0-) on
line 29, and $6,700 on line 30. Their USVI ad-
justed gross income (AGI) is $6,700.
Part III. On line 31, the Morenos enter the
amount from Form 1040, line 16 ($4,539). Their
Form 1040 does not show any entries required
on line 32, so they leave that line blank and en-
ter $4,539 on line 33.
The Morenos enter their worldwide AGI,
$54,901 (Form 1040, line 11), on line 34. Next,
they find what percentage of their AGI is from
USVI sources ($6,700 ÷ $54,901 = 0.122) and
enter that as a decimal on line 35. They then
apply that percentage to the U.S. tax entered on
line 33 to find the amount of U.S. tax allocated
to USVI income ($4,539 x 0.122 = $554), and
enter that amount on line 36.
Part IV. Part IV is used to show payments
of income tax to the USVI only. The Morenos
had no tax withheld by the USVI, but made esti-
mated tax payments to the USVI of $400, which
they entered on lines 38 and 40. They include
this amount ($400) in the total payments on
Form 1040, line 33. On the dotted line next to
the entry space for line 33, they enter “Form
8689” and show the amount. The Morenos do
not complete Form 1116 because they receive
credit on Form 1040, line 33, for the tax paid to
the USVI.
The income tax they owe to the USVI ($154)
is shown on Form 8689, line 45. They enter this
amount on line 46. They also include this addi-
tional amount ($154) on the dotted line next to
the entry space and in the total on Form 1040,
line 33. The Morenos will pay their USVI tax at
the same time they file the copy of their U.S. in-
come tax return with the USVI.
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Page 26 Chapter 5 Illustrated Examples
Form 4563 (Revised August 2019), Exclusion of Income for Bona Fide Residents of American Samoa
Form 4563
(Rev. August 2019)
Exclusion of Income for Bona Fide Residents
of American Samoa
Department of the Treasury
Internal Revenue Service
▶
Attach to Form 1040 or 1040-SR.
▶
Go to www.irs.gov/Form4563 for the latest information.
OMB No. 1545-0074
Attachment
Sequence No.
563
Name(s) shown on Form 1040 or 1040-SR Your social security number
Part I General Information
1
Date bona de residence began
▶
, and ended
▶
2 Type of living quarters in
American Samoa
Rented room Rented house or apartment
Quarters furnished by employer Purchased home
3a Did any of your family live with you in American Samoa during any part of the tax year? .......
Yes No
b
If “Yes,” who and for what period?
▶
4a Did you maintain any home(s) outside American Samoa? ................. Yes No
b If “Yes,” show address of your home(s), whether it was rented, the name of each occupant, and his or her relationship to
you.
▶
5
Name and address of employer (state if self-employed)
▶
6
Complete columns (a) through (d) below for days absent from American Samoa during the tax year.
(a) Date left (b) Date
returned
(c) Number of
days absent
(d) Reason for absence
Part II Figure Your Exclusion. Include only income that qualies for the exclusion. See instructions.
7 Wages, salaries, tips, etc. ......................... 7
8 Taxable interest ............................. 8
9 Ordinary dividends ............................ 9
10 Business income ............................ 10
11 Capital gain .............................. 11
12 Rental real estate, royalties, etc. ....................... 12
13 Farm income .............................. 13
14
Other income. List type and amount
▶
14
15 Add lines 7 through 14. This is the amount you may exclude from your gross income this tax year
▶
15
For Paperwork Reduction Act Notice, see instructions.
Cat. No. 12909U
Form 4563 (Rev. 8-2019)
John Black
111-00-1111
6-2-2019 not ended
Samoa Products Co., Pago Pago, American Samoa
11-11-2020
11-25-2020
14 Vacation to New Zealand
24,000
220
24,220
800 Kennedy Street, Ft. Lauderdale, FL, rental condominium, Bob Wilson, unrelated
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Chapter 5 Illustrated Examples Page 27
2020 Form 5074, Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana
Islands
Tracy Grey
20,000
20,000
1,413
1,413
18,587
1,409
1,409
111-00-2222
Form 5074
Department of the Treasury
Internal Revenue Service
Allocation of Individual Income Tax to Guam or the
Commonwealth of the Northern Mariana Islands (CNMI)
Go to www.irs.gov/Form5074 for the latest information.
Attach to Form 1040 or 1040-SR.
OMB No. 1545-0074
2020
Attachment
Sequence No.
168
Name(s) shown on Form 1040 or 1040-SR Your social security number
Part I
Income From Guam or the CNMI Reported on Form 1040, 1040-SR, or Schedule 1 (Form 1040), Part I
Guam CNMI
1 Wages, salaries, tips, etc. . . .... ..... .... . . ...
1
2 Taxable interest . . .... ............. . . . . 2
3 Ordinary dividends . . ... . ..... . ..... . . ... 3
4 Taxable refunds, credits, or offsets of local Guam or CNMI income taxes . . . . 4
5 Alimony received . . .... ............. . . . . 5
6 Business income or (loss) . . .... ............. . 6
7 Capital gain or (loss) . . ... . ..... . ..... . . ... 7
8 Other gains or (losses) . . .... ..... .... . . .... 8
9 IRA distributions (taxable amount) . . .... . .......... 9
10 Pensions and annuities (taxable amount) . . . . . ... ... .... 10
11 Rental real estate, royalties, partnerships, S corporations, trusts, etc. . . ... . 11
12 Farm income or (loss) . . .... ..... .... . . .... 12
13 Unemployment compensation . . ...... ... .... . . . 13
14 Social security benets (taxable amount) . . . . . ... ... .... 14
15
Other income. List type and amount
15
16 Total income. Add lines 1 through 15 . . ... . .... . . ... 16
Part II
Adjustments to Income From Guam or the CNMI Reported on
Form 1040, 1040-SR, or
Schedule 1
(Form 1040), Part II
17 Educator expenses . . .... ............. . . .
17
18
Certain business expenses of reservists, performing artists, and fee-basis government
ofcials . . . . . . ..... ... . ...........
18
19 Health savings account deduction . . .... . .......... 19
20 Moving expenses for members of the armed forces . . ... . . .... 20
21 Deductible part of self-employment tax . . . . . ... ... .... 21
22 Self-employed SEP, SIMPLE, and qualied plans . . ... ... ... . 22
23 Self-employed health insurance deduction ..... . . ....... 23
24 Penalty on early withdrawal of savings . . . . . . . ......... 24
25 IRA deduction . . .... ......... . . ..... . . 25
26 Student loan interest deduction . . ...... ... .... . . . 26
27 Tuition and fees deduction. See instructions ..... . . ....... 27
28 Charitable contributions. See instructions . . . . . ... ... .... 28
29 Add lines 17 through 28 . . .... ..... .... . . .... 29
30 Adjusted gross income. Subtract line 29 from line 16 . . ... ... . 30
Part III
Payments of Income Tax to Guam or the CNMI
31 Payments on estimated tax return led with Guam or the CNMI . . ... . .
31
32
Income tax withheld from your wages while employed by the U.S. Government as a
civilian in Guam or the CNMI . . .... . ............
32
33
Income tax withheld from your wages while employed as a member of the
U.S. Armed Forces in Guam or the CNMI . . . . . ... ... ....
33
34
Income tax withheld from your wages earned in Guam or the CNMI other than
amounts on lines 31 through 33 . . .... . ...........
34
35 Total payments. Add lines 31 through 34 . . . . . ... ... ... 35
For Paperwork Reduction Act Notice, see the Instructions for Forms 1040 and 1040-SR.
Cat. No. 42243X
Form 5074 (2020)
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Page 28 Chapter 5 Illustrated Examples
2020 Form 8689, Allocation of Individual Income Tax to the U.S. Virgin Islands
Juan and Carla Moreno
500
6,200
6,700
6,700
4,539
554
400
400
400
154
4,539
122
222-00-2222
154
Form 8689
Department of the Treasury
Internal Revenue Service
Allocation of Individual Income Tax
to the U.S. Virgin Islands
Attach to Form 1040 or 1040-SR.
Go to www.irs.gov/Form8689 for the latest information.
OMB No. 1545-0074
2020
Attachment
Sequence No.
869
Name(s) shown on Form 1040 or 1040-SR Your social security number
Part I Income From the U.S. Virgin Islands (USVI)
1 Wages, salaries, tips, etc. . . ... . ... .... . . .......... 1
2 Taxable interest . . ... . ....... . . .............. 2
3 Ordinary dividends . . ... . ....... . . ............. 3
4 Taxable refunds, credits, or offsets of local USVI income taxes . . ... . . ..... . 4
5 Alimony received . . ... . ....... . . ............. 5
6 Business income or (loss) . . ... . ... .... . . .......... 6
7 Capital gain or (loss) . . .... ............. . . ..... . 7
8 Other gains or (losses) . . ... . ... .... . . ........... 8
9 IRA distributions (taxable amount) . . ... . ... .... . . ........ 9
10 Pensions and annuities (taxable amount) . . . ... ... .... . . ..... 10
11 Rental real estate, royalties, partnerships, S corporations, trusts, etc. . . ... ... ... 11
12 Farm income or (loss) . . .... ............. . . ..... . 12
13 Unemployment compensation . . .... . ............ . . ... 13
14 Social security benets (taxable amount) . . . ... ... .... . . ..... 14
15
Other income. List type and amount
15
16 Add lines 1 through 15. This is your total USVI income . . ... . . .......
16
Part II Adjusted Gross Income From the USVI
17 Educator expenses . . .... ............. 17
18
Certain business expenses of reservists, performing artists, and fee-basis government ofcials
18
19 Health savings account deduction . . ... . ... .... . 19
20 Moving expenses for members of the armed forces . . ... ... . 20
21 Deductible part of self-employment tax . . . . . . . ..... . 21
22 Self-employed SEP, SIMPLE, and qualied plans . . ... . . ... 22
23 Self-employed health insurance deduction . . . ... ... ... 23
24 Penalty on early withdrawal of savings . . . . . . . ..... . 24
25 IRA deduction . . ... . ....... . . ...... 25
26 Student loan interest deduction . . ... . ... .... . . 26
27 Tuition and fees deduction. See instructions . . . ... ... . . 27
28 Charitable contributions. See instructions . . . ... ... ... 28
29 Add lines 17 through 28 . . ... . ... .... . . ........... 29
30 Subtract line 29 from line 16. This is your USVI adjusted gross income . . ... . . . . 30
Part III Allocation of Tax to the USVI
31 Enter amount from Form 1040 or 1040-SR, line 24 . . ... ... ... .... . . 31
32
Enter total of certain amounts from Form 1040 or 1040-SR. See instructions on page 4 for amount to enter
32
33 Subtract line 32 from line 31 . . .... . ............ . . ... 33
34 Enter amount from Form 1040 or 1040-SR, line 11 . . ... ... . 34
35
Divide line 30 above by line 34. Enter the result as a decimal (rounded to at least 3 places). Do not
enter more than 1.000 . . ... . .... . . ..... . . .......
35 .
36 Multiply line 33 by line 35. This is your tax allocated to the USVI . . ... ... ... .
36
Part IV Payments of Income Tax to the USVI
37 Income tax withheld by the USVI . . ... . ... .... . . 37
38 2020 estimated tax payments and amount applied from 2019 return ... 38
39 Amount paid with Form 4868 (extension request) . . ... . . ... 39
40 Add lines 37 through 39. These are your total payments to the USVI . . ... ... . . 40
41
Enter the smaller of line 36 or line 40. Include this amount in the total on Form 1040 or 1040-SR, line
33. On the dotted line next to line 33, enter “Form 8689” and show this amount . . ... . .
41
42 Overpayment to the USVI. If line 40 is more than line 36, subtract line 36 from line 40 . . ... 42
43 Amount of line 42 you want refunded to you . . . ... ... .... . . ... 43
44 Amount of line 42 you want applied to your 2021 estimated tax . . . . 44
45 Amount you owe to the USVI. If line 40 is less than line 36, subtract line 40 from line 36 . . ... 45
46
Enter the amount from line 45 that you will pay when you le your income tax return. Include this
amount in the total of Form 1040 or 1040-SR, line 33. On the dotted line next to line 33, enter “Form
8689” and show this amount . . ... . ... .... . . ........ .
46
For Paperwork Reduction Act Notice, see your tax return instructions.
Cat. No. 64603D
Form 8689 (2020)
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Chapter 5 Illustrated Examples Page 29
6.
How To Get Tax
Help
Note. Overseas taxpayers see Taxpayer Assis-
tance Outside the United States, later.
Taxpayer Assistance
If you have questions about a tax issue, need
help preparing your tax return, or want to down-
load free publications, forms, or instructions, go
to IRS.gov and find resources that can help you
right away.
Preparing and filing your tax return. After
receiving all your wage and earnings state-
ments (Form W-2, W-2G, 1099-R, 1099-MISC,
1099-NEC, etc.); unemployment compensation
statements (by mail or in a digital format) or
other government payment statements (Form
1099-G); and interest, dividend, and retirement
statements from banks and investment firms
(Forms 1099), you have several options to
choose from to prepare and file your tax return.
You can prepare the tax return yourself, see if
you qualify for free tax preparation, or hire a tax
professional to prepare your return.
Free options for tax preparation. Go to
IRS.gov to see your options for preparing and
filing your return online or in your local commun-
ity, if you qualify, which include the following.
•
Free File. This program lets you prepare
and file your federal individual income tax
return for free using brand-name tax-prep-
aration-and-filing software or Free File filla-
ble forms. However, state tax preparation
may not be available through Free File. Go
to IRS.gov/FreeFile to see if you qualify for
free online federal tax preparation, e-filing,
and direct deposit or payment options.
•
VITA. The Volunteer Income Tax Assis-
tance (VITA) program offers free tax help
to people with low-to-moderate incomes,
persons with disabilities, and limited-Eng-
lish-speaking taxpayers who need help
preparing their own tax returns. Go to
IRS.gov/VITA, download the free IRS2Go
app, or call 800-906-9887 for information
on free tax return preparation.
•
TCE. The Tax Counseling for the Elderly
(TCE) program offers free tax help for all
taxpayers, particularly those who are 60
years of age and older. TCE volunteers
specialize in answering questions about
pensions and retirement-related issues
unique to seniors. Go to IRS.gov/TCE,
download the free IRS2Go app, or call
888-227-7669 for information on free tax
return preparation.
•
MilTax. Members of the U.S. Armed
Forces and qualified veterans may use Mil-
Tax, a free tax service offered by the De-
partment of Defense through Military One-
Source.
Also, the IRS offers Free Fillable
Forms, which can be completed online and
then filed electronically regardless of in-
come.
Using online tools to help prepare your re-
turn. Go to IRS.gov/Tools for the following.
•
The Earned Income Tax Credit Assistant
(IRS.gov/EITCAssistant) determines if
you’re eligible for the earned income credit
(EIC).
•
The Online EIN Application (IRS.gov/EIN)
helps you get an employer identification
number (EIN).
•
The Tax Withholding Estimator (IRS.gov/
W4app) makes it easier for everyone to
pay the correct amount of tax during the
year. The tool is a convenient, online way
to check and tailor your withholding. It’s
more user-friendly for taxpayers, including
retirees and self-employed individuals. The
features include the following.
–
Easy to understand language.
–
The ability to switch between screens,
correct previous entries, and skip
screens that don’t apply.
–
Tips and links to help you determine if
you qualify for tax credits and deduc-
tions.
–
A progress tracker.
–
A self-employment tax feature.
–
Automatic calculation of taxable social
security benefits.
•
The First Time Homebuyer Credit Account
Look-up (IRS.gov/HomeBuyer) tool pro-
vides information on your repayments and
account balance.
•
The Sales Tax Deduction Calculator
(IRS.gov/SalesTax) figures the amount you
can claim if you itemize deductions on
Schedule A (Form 1040).
Getting answers to your tax ques-
tions. On IRS.gov, you can get
up-to-date information on current
events and changes in tax law.
•
IRS.gov/individuals/international-
taxpayers/individuals-living-or-working-in-
us-possessions: Find discussions, rules for
taxpayers living or working in the U.S. terri-
tories.
•
IRS.gov/Help: A variety of tools to help you
get answers to some of the most common
tax questions.
•
IRS.gov/ITA: The Interactive Tax Assistant,
a tool that will ask you questions on a num-
ber of tax law topics and provide answers.
•
IRS.gov/Forms: Find forms, instructions,
and publications. You will find details on
2020 tax changes and hundreds of interac-
tive links to help you find answers to your
questions.
•
You may also be able to access tax law in-
formation in your electronic filing software.
Need someone to prepare your tax return?
There are various types of tax return preparers,
including tax preparers, enrolled agents, certi-
fied public accountants (CPAs), attorneys, and
many others who don’t have professional cre-
dentials. If you choose to have someone pre-
pare your tax return, choose that preparer
wisely. A paid tax preparer is:
•
Primarily responsible for the overall sub-
stantive accuracy of your return,
•
Required to sign the return, and
•
Required to include their preparer tax iden-
tification number (PTIN).
Although the tax preparer always signs the
return, you're ultimately responsible for provid-
ing all the information required for the preparer
to accurately prepare your return. Anyone paid
to prepare tax returns for others should have a
thorough understanding of tax matters. For
more information on how to choose a tax pre-
parer, go to Tips for Choosing a Tax Preparer
on IRS.gov.
Coronavirus. Go to IRS.gov/Coronavirus for
links to information on the impact of the corona-
virus, as well as tax relief available for individu-
als and families, small and large businesses,
and tax-exempt organizations.
Tax reform. Tax reform legislation affects indi-
viduals, businesses, and tax-exempt and gov-
ernment entities. Go to IRS.gov/TaxReform for
information and updates on how this legislation
affects your taxes.
Employers can register to use Business
Services Online. The Social Security Adminis-
tration (SSA) offers online service at SSA.gov/
employer for fast, free, and secure online W-2
filing options to CPAs, accountants, enrolled
agents, and individuals who process Form W-2,
Wage and Tax Statement, and Form W-2c,
Corrected Wage and Tax Statement.
IRS social media. Go to IRS.gov/SocialMedia
to see the various social media tools the IRS
uses to share the latest information on tax
changes, scam alerts, initiatives, products, and
services. At the IRS, privacy and security are
paramount. We use these tools to share public
information with you. Don’t post your SSN or
other confidential information on social media
sites. Always protect your identity when using
any social networking site.
The following IRS YouTube channels pro-
vide short, informative videos on various tax-re-
lated topics in English, Spanish, and ASL.
•
Youtube.com/irsvideos.
•
Youtube.com/irsvideosmultilingua.
•
Youtube.com/irsvideosASL.
Watching IRS videos. The IRS Video portal
(IRSVideos.gov) contains video and audio pre-
sentations for individuals, small businesses,
and tax professionals.
Online tax information in other languages.
You can find information on IRS.gov/
MyLanguage if English isn’t your native lan-
guage.
Free interpreter service. Multilingual assis-
tance, provided by the IRS, is available at Tax-
payer Assistance Centers (TACs) and other
IRS offices. Over-the-phone interpreter service
is accessible in more than 350 languages.
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Page 30 Chapter 6 How To Get Tax Help
Getting tax forms and publications. Go to
IRS.gov/Forms to view, download, or print all of
the forms, instructions, and publications you
may need. You can also download and view
popular tax publications and instructions (in-
cluding the Instructions for Forms 1040 and
1040-SR) on mobile devices as an eBook at
IRS.gov/eBooks. Or you can go to IRS.gov/
OrderForms to place an order.
Access your online account (individual tax-
payers only). Go to IRS.gov/Account to se-
curely access information about your federal tax
account.
•
View the amount you owe, pay online, or
set up an online payment agreement.
•
Access your tax records online.
•
Review your payment history.
•
Go to IRS.gov/SecureAccess to review the
required identity authentication process.
Using direct deposit. The fastest way to re-
ceive a tax refund is to file electronically and
choose direct deposit, which securely and elec-
tronically transfers your refund directly into your
financial account. Direct deposit also avoids the
possibility that your check could be lost, stolen,
or returned undeliverable to the IRS. Eight in 10
taxpayers use direct deposit to receive their re-
funds. The IRS issues more than 90% of re-
funds in less than 21 days.
Getting a transcript of your return. The
quickest way to get a copy of your tax transcript
is to go to IRS.gov/Transcripts. Click on either
“Get Transcript Online” or “Get Transcript by
Mail” to order a free copy of your transcript. If
you prefer, you can order your transcript by call-
ing 800-908-9946.
Reporting and resolving your tax-related
identity theft issues.
•
Tax-related identity theft happens when
someone steals your personal information
to commit tax fraud. Your taxes can be af-
fected if your SSN is used to file a fraudu-
lent return or to claim a refund or credit.
•
The IRS doesn’t initiate contact with tax-
payers by email, text messages, telephone
calls, or social media channels to request
personal or financial information. This in-
cludes requests for personal identification
numbers (PINs), passwords, or similar in-
formation for credit cards, banks, or other
financial accounts.
•
Go to IRS.gov/IdentityTheft, the IRS Iden-
tity Theft Central webpage, for information
on identity theft and data security protec-
tion for taxpayers, tax professionals, and
businesses. If your SSN has been lost or
stolen or you suspect you’re a victim of
tax-related identity theft, you can learn
what steps you should take.
•
Get an Identity Protection PIN (IP PIN). IP
PINs are six-digit numbers assigned to eli-
gible taxpayers to help prevent the misuse
of their SSNs on fraudulent federal income
tax returns. When you have an IP PIN, it
prevents someone else from filing a tax re-
turn with your SSN. To learn more, go to
IRS.gov/IPPIN.
Checking on the status of your refund.
•
Go to IRS.gov/Refunds.
•
The IRS can’t issue refunds before
mid-February 2021 for returns that claimed
the EIC or the additional child tax credit
(ACTC). This applies to the entire refund,
not just the portion associated with these
credits.
•
Download the official IRS2Go app to your
mobile device to check your refund status.
•
Call the automated refund hotline at
800-829-1954.
Making a tax payment. The IRS uses the lat-
est encryption technology to ensure your elec-
tronic payments are safe and secure. You can
make electronic payments online, by phone,
and from a mobile device using the IRS2Go
app. Paying electronically is quick, easy, and
faster than mailing in a check or money order.
Go to IRS.gov/Payments for information on how
to make a payment using any of the following
options.
•
IRS Direct Pay: Pay your individual tax bill
or estimated tax payment directly from
your checking or savings account at no
cost to you.
•
Debit or Credit Card: Choose an approved
payment processor to pay online, by
phone, or by mobile device.
•
Electronic Funds Withdrawal: Offered only
when filing your federal taxes using tax re-
turn preparation software or through a tax
professional.
•
Electronic Federal Tax Payment System:
Best option for businesses. Enrollment is
required.
•
Check or Money Order: Mail your payment
to the address listed on the notice or in-
structions.
•
Cash: You may be able to pay your taxes
with cash at a participating retail store.
•
Same-Day Wire: You may be able to do
same-day wire from your financial institu-
tion. Contact your financial institution for
availability, cost, and cut-off times.
What if I can’t pay now? Go to IRS.gov/
Payments for more information about your op-
tions.
•
Apply for an online payment agreement
(IRS.gov/OPA) to meet your tax obligation
in monthly installments if you can’t pay
your taxes in full today. Once you complete
the online process, you will receive imme-
diate notification of whether your agree-
ment has been approved.
•
Use the Offer in Compromise Pre-Qualifier
to see if you can settle your tax debt for
less than the full amount you owe. For
more information on the Offer in Compro-
mise program, go to IRS.gov/OIC.
Filing an amended return. You can now file
Form 1040-X electronically with tax filing soft-
ware to amend 2019 Forms 1040 and 1040-SR.
To do so, you must have e-filed your original
2019 return. Amended returns for all prior years
must be mailed. See Tips for taxpayers who
need to file an amended tax return and go to
IRS.gov/Form1040X for information and up-
dates.
Checking the status of your amended re-
turn. Go to IRS.gov/WMAR to track the status
of Form 1040-X amended returns. Please note
that it can take up to 3 weeks from the date you
filed your amended return for it to show up in
our system, and processing it can take up to 16
weeks.
Understanding an IRS notice or letter
you’ve received. Go to IRS.gov/Notices to
find additional information about responding to
an IRS notice or letter.
Contacting your local IRS office. Keep in
mind, many questions can be answered on
IRS.gov without visiting an IRS Taxpayer Assis-
tance Center (TAC). Go to IRS.gov/LetUsHelp
for the topics people ask about most. If you still
need help, IRS TACs provide tax help when a
tax issue can’t be handled online or by phone.
All TACs now provide service by appointment,
so you’ll know in advance that you can get the
service you need without long wait times. Be-
fore you visit, go to IRS.gov/TACLocator to find
the nearest TAC and to check hours, available
services, and appointment options. Or, on the
IRS2Go app, under the Stay Connected tab,
choose the Contact Us option and click on “Lo-
cal Offices.”
The Taxpayer Advocate
Service (TAS) Is Here To
Help You
What Is TAS?
TAS is an independent organization within the
IRS that helps taxpayers and protects taxpayer
rights. Their job is to ensure that every taxpayer
is treated fairly and that you know and under-
stand your rights under the Taxpayer Bill of
Rights.
How Can You Learn About Your
Taxpayer Rights?
The Taxpayer Bill of Rights describes 10 basic
rights that all taxpayers have when dealing with
the IRS. Go to TaxpayerAdvocate.IRS.gov to
help you understand what these rights mean to
you and how they apply. These are your rights.
Know them. Use them.
What Can TAS Do For You?
TAS can help you resolve problems that you
can’t resolve with the IRS. And their service is
free. If you qualify for their assistance, you will
be assigned to one advocate who will work with
you throughout the process and will do every-
thing possible to resolve your issue. TAS can
help you if:
•
Your problem is causing financial difficulty
for you, your family, or your business;
•
You face (or your business is facing) an
immediate threat of adverse action; or
•
You’ve tried repeatedly to contact the IRS
but no one has responded, or the IRS
hasn’t responded by the date promised.
How Can You Reach TAS?
TAS has offices in every state, the District of
Columbia, and Puerto Rico. Your local advo-
cate’s number is in your local directory and at
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Chapter 6 How To Get Tax Help Page 31
TaxpayerAdvocate.IRS.gov/Contact-Us. You
can also call them at 877-777-4778 and in:
•
American Samoa, the CNMI, and Guam:
808-566-2950 (in Hawaii);
•
Puerto Rico, and USVI: 787-522-8600 for
Spanish, and 787-522-8601 for English (in
Puerto Rico).
How Else Does TAS Help
Taxpayers?
TAS works to resolve large-scale problems that
affect many taxpayers. If you know of one of
these broad issues, please report it to them at
IRS.gov/SAMS.
TAS for Tax Professionals
TAS can provide a variety of information for tax
professionals, including tax law updates and
guidance, TAS programs, and ways to let TAS
know about systemic problems you’ve seen in
your practice.
Low Income Taxpayer
Clinics (LITCs)
LITCs are independent from the IRS. LITCs
represent individuals whose income is below a
certain level and need to resolve tax problems
with the IRS, such as audits, appeals, and tax
collection disputes. In addition, clinics can pro-
vide information about taxpayer rights and re-
sponsibilities in different languages for individu-
als who speak English as a second language.
Services are offered for free or a small fee for
eligible taxpayers. To find a clinic near you, visit
www.TaxpayerAdvocate.IRS.gov/about-us/
Low-Income-Taxpayer-Clinics-LITC/ or see IRS
Pub. 4134, Low Income Taxpayer Clinic List.
Taxpayer Assistance
Outside the United
States
If you are outside the United States,
you can call 267-941-1000 (Eng-
lish-speaking only). This number is not
toll free.
If you wish to write instead of calling,
please address your letter to:
Internal Revenue Service
International Accounts
Philadelphia, PA 19255-0725
U.S.A.
For more information, go to IRS.gov/help/
contact-my-local-office-internationally.
Taxpayer Advocate Service. If you live out-
side of the United States, you can call the Tax-
payer Advocate at (787) 522-8601 in English or
(787) 522-8600 in Spanish. You can contact the
Taxpayer Advocate Service in person at:
Internal Revenue Service
Taxpayer Advocate Service
City View Plaza, 48 Carr 165,
Guaynabo, P.R. 00968-8000
You can call the Taxpayer Advocate toll free
at 1-877-777-4778. For more information on the
Taxpayer Advocate Service and contacts if you
are outside of the United States go to IRS.gov/
Advocate/Local-Taxpayer-Advocate/Contact-
Your-Local-Taxpayer-Advocate.
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Page 32 Chapter 6 How To Get Tax Help
To help us develop a more useful index, please let us know if you have ideas for index entries.
See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
Index
A
Additional child tax credit 15
Additional Medicare Tax 3, 12,
13, 16, 18, 20, 24
Aliens:
Nonresident (See specific
territory)
Resident (See specific territory)
American Samoa 11–13
Form 4563 11
Armed forces, U.S.:
(See also specific territory)
Armed Forces, U.S.:
Bona fide residence 3
Earned income credit 22
Source of income 8
Spouse 4, 8, 14, 16, 18, 20
Assistance (See Tax help)
Awards and prizes 10
B
Bankruptcy cases,
Chapter 11 24
Bona fide residence 3–7
Closer connection 6, 7
Year of move 6, 7
Presence test 4
Child, defined 4
Nonresident aliens 4
Qualifying medical
treatment 5
Territory, days in 4
U.S., days in 4
Reporting change in residency
status 7
Penalty for not reporting 7
Tax home 6
Exceptions 6
government officials 6
Seafarers 6
Students 6
Year of move 6, 7
Tests to meet 3
U.S. Armed Forces 3
Year of move 7
Puerto Rico 7
C
Change in residency status,
reporting 7
Penalty for not reporting 7
Change of address 2
Form 8822 2
Child, defined 4
Child tax credit, additional 15
Closer connection 6, 7
Year of move 6, 7
CNMI 17
CNMI tax return 16
Comments and suggestions 3
Commonwealth of Puerto
Rico 13–15
Commonwealth of the Northern
Mariana Islands 15
Commonwealth of the Northern
Mariana Islands
(Commonwealth of the
Northern Mariana Islands):
Form 5074 15
Compensation for labor or
personal services 8, 9
Alternative basis 9
Multi-year compensation 9
Time basis 8, 9
Competent Authority
Assistance 25
How to make your request 25
Protective Claim 25
Credits:
Earned income 22
Foreign tax 24
D
Days of presence in a territory:
Presence test:
Territory, days in 4
Days of presence in the United
States:
Charitable sports event 5
Full-time student. 5
Qualifying medical treatment 4
School 5
Student 5
Days of presence in the United
States.:
Presence test:
U.S., days in 4
Days of Presence in the United
States or Relevant Territory 4
Deductions:
IRA contribution 23
Moving expenses:
(See also specific territory)
U.S. return 23
Self-employment tax, one-half
of 23
Standard deduction 23
Deductions if Territory Income Is
Excluded 23
Dispositions of certain property,
special rules for 9
Dividends 9
Double taxation, inconsistent tax
treatment:
Mutual agreement procedure 25
E
Earned income credit 22
Effectively connected
income 10, 11
Estimated tax payments 12, 14,
16, 18, 20, 25
Extension of time to file:
U.S. Virgin Islands 20
Extension of time to file U.S.
return 22
Automatic 6-Month
Extension 22
Extension beyond 2 months 22
Extension beyond 6 months 22
Form 4868 22
How to get the automatic
extension 22
Individuals outside the United
States and Puerto Rico 22
Married taxpayers 22
Married taxpayers, how to get
the extension 22
When to file 22
When you file your return 22
F
Filing requirements 18
American Samoa 11–13
Form 4563 11
CNMI 17
Commonwealth of the Northern
Mariana Islands 15
Form 5074 15
E-file-options, U.S. return 21
Guam 17, 18
Form 5074 17
Puerto Rico 13–15
Territories 11, 20
U.S. Virgin Islands:
Form 1040INFO 19
Form 4868 20
Form 8689 19
Foreign tax credit 24
Form:
1040-ES 25
1040INFO 19
1040-NR 12, 14, 15, 17, 19
1040-PR 15
1040-SS 12, 15, 16, 18, 20
1116 24
3903 23
4563 11
4563, illustrated example 25–27
4868 20
5074 15, 17
5074, illustrated example 26, 28
8689 19
8689, illustrated example 26, 29
8898 7
Schedule A (Form 1040 or
1040-SR) 23
Schedule SE (Form 1040 or
1040-SR) 24
Form 8938,Statement of
Specified Foreign Financial
Assets, 2
Fringe benefits 9
G
government employees,
U.S. (See specific territory)
Grants 10
Guam 17, 18
Form 5074 17
I
Income:
Awards and prizes 10
Effectively connected
income 10, 11
Grants 10
Investments 9
Labor or personal services 8, 9
Pensions 9
Sales or other dispositions of
property 9, 10
Scholarships and fellowships 10
Services performed partly within
a territory 8, 9
Source of 7
U.S. Armed Forces 8
U.S. income rule 8
Income from American Samoa or
Puerto Rico excluded. 22
Deductions if income from
American Samoa or Puerto
Rico excluded 23
Interest income 9
Inventory:
Sales or other dispositions of 9
Investment income 9
IRA deduction 23
Itemized deductions 23
M
Medical treatment, qualifying 5
Moving expense deduction:
(See also specific territory)
U.S. return 23
N
Net Investment Income Tax 3,
12, 13, 24
Nonresident alien (See specific
territory)
Northern Mariana Islands 15–17
P
Paying your taxes 25
Penalty:
Failure to report change in
residency status 7
Pension income 9
Permanent home 5
Personal property:
Sales or other dispositions of 9
Personal service income 8, 9
Presence test 4
Child, defined 4
Nonresident aliens 4
Qualifying medical treatment 5
Significant connection:
Permanent home 5
Territory, days in 4
U.S., days in 4
Prizes 10
Publications (See Tax help)
Puerto Rico 13–15
Additional child tax credit 15
Bona fide residence:
Year of move 7
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Publication 570 (2020) Page 33
Q
Qualifying medical treatment 5
R
Real property:
Sales or other dispositions of 9
Reminders 1
Additional Medicare Tax. 2
Earned income credit (EIC) 2
Electronic filing 2
Expired ITIN. 2
Individual taxpayer identification
numbers (ITINs) for aliens. 2
Net Investment Income Tax. 2
Self-employment tax. 2
Rental income 9
Report a change of bona fide
residence 2
Resident alien (See specific
territory)
Royalty income 9
S
Scholarships and fellowships 10
Self-employment tax:
(See also specific territory)
U.S. return 24
Self-employment tax
deduction 23
Services performed partly within
a territory 8, 9
Significant Connection 5
Source of income 7–11
Awards and prizes 10
Effectively connected
income 10, 11
Grants 10
Investment income 9
Labor or personal services 8, 9
Pensions 9
Sales or other dispositions of
property 9, 10
Scholarships and fellowships 10
Services performed partly within
a territory 8, 9
U.S. Armed Forces 8
U.S. income rule 8
Special rules for
filing (See specific territory)
Special rules for gains from
dispositions of certain
property 9
Standard deduction 23
T
Tables:
U.S. filing requirements for most
taxpayers (Table 4-1) 21
U.S. source of income
(Table 2-1) 8
Tax help 30
Tax home 6
Exceptions 6
government officials 6
Seafarers 6
Students 6
Year of move 6, 7
Taxpayer Advocate Service 2
Territories, list of 3
Territory source income 7–11
Awards and prizes 10
Effectively connected
income 10, 11
Grants 10
Investment income 9
Labor or personal services 8, 9
Pensions 9
Sales or other dispositions of
property 9, 10
Scholarships and fellowships 10
Services performed partly within
a territory 8, 9
U.S. Armed Forces 8
U.S. income rule 8
U
U.S. Armed Forces:
(See also specific territory)
Bona fide residence 3
Earned income credit 22
Source of income 8
Spouse 4, 8, 14, 16, 18, 20
U.S. government
employees (See specific
territory)
U.S. income rule 8
U.S. return, territory income
excluded on 22–24
Credits:
Earned income credit 22
Foreign tax credit 24
Deductions:
IRA contribution 23
Itemized deductions 23
Moving expenses 23
Self-employment tax,
one-half of 23
Standard deduction 23
U.S. return with excluded
income 23
U.S. taxation of territory income,
to get information on 3
U.S. Virgin Islands 18–20
Form 1040INFO 19
Form 4868 20
Form 8689 19
V
Virgin Islands, U.S. 18–20
W
What's New:
Increase in and modification of
the additional child tax credit
(ACTC) 2
Maximum income subject to
social security tax 1
Optional methods to figure net
earnings 1
Standard deduction amount
increased 1
When to file:
(See also specific territory)
U.S. return 21
Where To File:
(See also specific territory)
U.S. return 22
Which return to file (See specific
territory)
Who must file:
(See also specific territory)
U.S. return 21
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