From 8689 is form for tax that is distributed to US citizens and resident aliens who earn income from sources in the US Virgin Islands (USVI) but not bonafide residents. This form is distributed by the Internal Revenue Service (IRS). The US Virgin Islands are considered an unincorporated territory of the United States.
In general, bonafide residents of the Island only pay taxes on USVI income to the local tax jurisdiction. If you earn income from the island and you are not a bonafide resident of that island, you would need to pay taxes to the Virgin Islands and the IRS.
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Who Must File Form 8689: Allocation of Individual Income Tax to the U.S. Virgin Islands?
If you do not qualify to be a bonafide resident of the Virgin Islands, you are required to file form 8689. This applies to both citizens and resident aliens. Two identical form 1040 documents must be filed by the taxpayers. They file one with the US Virgin Islands and one with the United States of America. The form 8689 alongside the original form 1040, is then sent to the IRS. Before you can qualify to be a bonafide resident of the US Virgin Islands, the individual must meet the physical presence test. Also the individual must have a tax home outside of the Virgin Island or have any connection closer to the mainland US or another country that they do with the US Virgin islands.
For material couples filing jointly, the individual with the highest adjustable gross income (AGO) must be able to qualify as a bonafide resident of the Virgin Islands for the couple to be considered resident when filing.
What is Form 8689 Used for?
What portion of income tax should be allocated to the US Virgin islands is determined by the form 8689. Taxes paid to the Virgin Islands go to the US Virgin Islands Treasury, rather than to the US treasury. For any tax allocated to the virgin islands, tax payers may qualify for a tax credit on their US tax returns as long as those taxes were actually paid to the virgin Island.
In general, any tax amount that is overboard to the United States of America will not be applied to the amount owed to the Virgin Island. Similarly also, any overpaid amount to the Virgin Islands will not be applied to the amount a taxpayer owes to the United States. On line 46, the amount of tax paid to the virgin island is reported. This amount is then reported on line 33 of your form 1040 and taken as a credit.
How do you file form 8689?
Identical tax returns with the United State and the United States Virgin Island must be filed by the taxpayer. If a check is being enclosed or money order, original form 1040 should be filed including form 8689 with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215 USA. If a money order or check is included, the original return should be filed with the Internal Revenue Service, P.O Box 1303, Charlotte, NC 28201-1303 USA.
A signed copy of form 1040 should be filed with all attachments, forms and schedules, including form (8689) with the Virgin Islands Bureau of Internal Revenue, 6115 Estate Smith Bay, Suite 225, St. Thomas, VI 00802. A signed copy of your US return will be accepted and will be process as an original return.