IRS Releases Publication 570 (2020), Tax Guide for Individuals With Income from U.S. Possessions

Department

of the

Treasury

Internal

Revenue

Service

Feb 01, 2021

Publication 570

Cat. No. 15118B

Tax Guide

for Individuals With Income From U.S. Possessions

For use in preparing

2020 Returns


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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

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 TIP 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

Page 2

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 CAUTION 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

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 TIP 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 TIP 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 TIP 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

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

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

Chapter 1Bona Fide ResidencePage 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 TIP 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.

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:

d. 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

e. 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:

f. 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,

Page 4Chapter 1Bona 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:

f. The patient's name,

g. A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physi-cian,

h. The dates on which the medical treat-ment was provided, and

i. 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

Chapter 1Bona Fide ResidencePage 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

Page 6Chapter 1Bona Fide Residence

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

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

closer connection test for that year. See Special		2017 through December 2019, Jean was a
Rules in the Year of a Move next.		bona fide resident of American Samoa. Jean
		continued to live there until September 6, 2020,
Special Rules in the Year		when she accepted new employment and
		moved to Hawaii. Jean's principal place of busi-
		ness from January 1 through September 5,
of a Move		2020 (more than 183 days), was in American
If you are moving to or from a territory during		Samoa, and during that period Jean did not
		have a closer connection to the United States or
the year, you may still be able to meet the tax		a foreign country than to American Samoa. If
home and closer connection tests for that year.		Jean continues to live and work in Hawaii for
Year of Moving to a Territory		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
You will satisfy the tax home and closer con-		American Samoa. If Jean also satisfies the
		presence test in 2020, she will be considered a
nection tests in the tax year of changing your
		bona fide resident for the 2020 tax year.
residence to the relevant territory if you meet all

of the following.		Puerto Rico
•	You have not been a bona fide resident of
	the relevant territory in any of the 3 tax	You will be considered a bona fide resident of
	years immediately preceding your move.
•	In the year of the move, you do not have a	Puerto Rico for the part of the tax year preced-
	tax home outside the relevant territory or a	ing the date on which you move if you:
	closer connection to the United States or a	•	Are a U.S. citizen,
	foreign country than to the relevant territory	•	Are a bona fide resident of Puerto Rico for
	during any of the last 183 days of the tax		at least 2 tax years immediately preceding
	year.	•	the tax year of the move,
•	You are a bona fide resident of the relevant		Cease to be a bona fide resident of Puerto
	territory for each of the 3 tax years immedi-	•	Rico during the tax year,
	ately following your move.		Cease to have a tax home in Puerto Rico
		•	during the tax year, and
	*Example.* Dwight Wood, a U.S. citizen, files		Have a closer connection to Puerto Rico
returns on a calendar year basis. He lived in the			than to the United States or a foreign coun-
United States from January 2014 through May			try throughout the part of the tax year pre-
2020. In June 2020, he moved to the USVI, pur-			ceding the date on which you cease to
chased a house, and accepted a permanent job			have a tax home in Puerto Rico.
with a local employer. From July 1 through De-			*Example.* Randy White, a U.S. citizen, files
cember 31, 2020 (more than 183 days),
Dwight's principal place of business was in the		returns on a calendar year basis. For all of 2018
USVI and, during that time, he did not have a		and 2019, Randy was a bona fide resident of
closer connection to the United States or a for-		Puerto Rico. From January through April 2020,
eign country than to the USVI.		Randy continued to reside and maintain his
	If he is a bona fide resident of the USVI dur-	principal place of business in and closer con-
ing all of 2021 through 2022, he will satisfy the		nection to Puerto Rico. On May 5, 2020, Randy
tax home and closer connection tests for 2020.		moved and changed his tax home to Nevada.
If Dwight also satisfies the presence test in		Later that year, he established a closer connec-
2020, he will be considered a bona fide resident		tion to the United States than to Puerto Rico.
of the USVI for the 2020 tax year.		Randy did not satisfy the presence test for 2020
		with respect to Puerto Rico, nor the tax home or
Year of Moving From a		closer connection tests. However, because
		Randy was a bona fide resident of Puerto Rico
Territory		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.

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.

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.

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.

Chapter 2Possession Source IncomePage 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-

Table 2-1.General Rules for Determining U.S. Source of Income

Item of Income	Factor Determining Source
Salaries, wages, and other compensation	Where labor or services performed
for labor or personal services	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:	Location of property
Natural resources
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).

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.

Page 8Chapter 2Possession 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}× $80,000 = $60,000

240 days

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).

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-

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.

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-

tory, receive interest from a corporation created		*Purchased.* Income from the sale of inven-
or organized in that territory, and are a share-	tory that you purchased is sourced where you
holder of that corporation, and you own, directly	sell the property. Generally, this is where title to
or indirectly, at least 10% of the total voting	the property passes to the buyer. However, in-
stock of the corporation. See Regulations sec-	come from the sale of inventory purchased
tion 1.937-2(i) for more information.	within a U.S. territory and sold within the United
Dividends. Generally, dividends paid by a cor-	States is sourced based on an allocation. For
	information on making the allocation, see Regu-
poration created or organized in a relevant terri-	lations section 1.863-3.
tory will be considered income from sources		*Produced.* Income from the sale of inven-
within that territory. There are additional rules
for bona fide residents of a relevant territory	tory that you produced in a relevant territory and
who receive dividend income from territory cor-	sold outside that territory (or vice versa) is
porations, and who own, directly or indirectly, at	sourced based on an allocation. For information
least 10% of the voting stock of the corporation.	on making the allocation, see Regulations sec-
For more information, see Regulations section	tion 1.863-3.
1.937-2(g).	Special Rules for Gains From
Rental income. Rents from property located in
	Dispositions of Certain Property
a relevant territory are treated as income from	There are special rules for gains from disposi-
sources within that territory.
Royalties. Royalties from natural resources lo-	tions of certain investment property (for exam-
	ple, stocks, bonds, debt instruments, diamonds,
cated in a relevant territory are considered in-	and gold) owned by a U.S. citizen or resident
come from sources within that territory.	alien prior to becoming a bona fide resident of a
Also considered territory source income are	territory. You are subject to these special rules if
royalties received for the use of, or for the privi-	you meet both of the following conditions.
lege of using, in a relevant territory, patents,	•	For the tax year for which the source of the
copyrights, secret processes and formulas,		gain must be determined, you are a bona
goodwill, trademarks, trade brands, franchises,	•	fide resident of the relevant territory.
and other like property.		For any of the 10 years preceding that
Sales or Other Dispositions		year, you were a citizen or resident alien of
		the United States (other than a bona fide
		resident of the relevant territory).
of Property

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.

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.

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

Chapter 2Possession Source IncomePage 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.

Fordetails,seeRegulationssection

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 CAUTION 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

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

CAUTION 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,

Page 10Chapter 2Possession 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.

CAUTION

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).

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

Chapter 3Filing Information for Individuals in Certain U.S. PossessionsPage 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.

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

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

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

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-

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.

NationalGuardandmilitaryreservists.

Members of the National Guard or a reserve

Page 12Chapter 3Filing 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.

CAUTION

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

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

Chapter 3Filing Information for Individuals in Certain U.S. PossessionsPage 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.

Page 14Chapter 3Filing 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.

CAUTION

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

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.

Chapter 3Filing Information for Individuals in Certain U.S. PossessionsPage 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

Page 16Chapter 3Filing 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.

CAUTION

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

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

Chapter 3Filing Information for Individuals in Certain U.S. PossessionsPage 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

Page 18Chapter 3Filing 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		USVI AGI
U.S. return	×
(after certain
		Worldwide AGI
adjustments)

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

Chapter 3Filing Information for Individuals in Certain U.S. PossessionsPage 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

Page 20Chapter 4Filing 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	$12,400
separately	$18,650
Head of household
Married filing jointly or	$24,800
Qualifying widow(er)

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:

$12,400

$8,000_×(regular_{= $3,543}

$28,000standard

deduction)

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:

		$26,100
$6,000		(standard
	×	deduction	= $3,820
		for 65 or
$41,000

older (one

spouse))

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-TIP 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.

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

Chapter 4Filing U.S. Tax ReturnsPage 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 CAUTION 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 TIP tax_file. if you use the extension of time to

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.

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

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:

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.

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

Page 22Chapter 4Filing 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 CAUTION need to file a U.S. tax return.

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						$8,800
$96,000
		×		$11,000	= (enter on line 1
$120,000
						of Schedule A)
Real Estate Taxes						$8,000
$96,000
			×	$10,000	= (enter on line 5b

$120,000
						of Schedule A)

Home Mortgage Interest						$13,000
	$96,000
			×	$16,250	=	(enter on
$120,000						line 8a of

Schedule A)

Chapter 4Filing U.S. Tax ReturnsPage 23

Charitable Contributions (cash contributions)

$96,000		$4,000
	× $5,000 =	(enter on line 11
$120,000
		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-

Jason's wages from

U.S.

government . . . . . .

Lynn's wages from

Puerto Rico

corp. . . . . . . . . . . . .

Dividend from Puerto Rico corp. doing business in Puerto Rico . . . . . . . . . . . .

Dividend from U.S. corp. doing business

in U.S.* . . . . . . . . .

Totals . . . . . . . . .

TaxableExcludable

$25,000

$15,000

200

1,000

$26,000$15,200

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

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		Tax paid	Reduction
based on that income
		or accrued
	x		= in foreign
Total income
		to the	taxes
subject to territory		territory

tax less deductible
expenses based on
that income

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

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-

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.

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.

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 CAUTION 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

Page 24Chapter 4Filing 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 TIP 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.

Nonresidentaliensmustgenerally

present their initial request for assis-CAUTION 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

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.

Chapter 5Illustrated ExamplesPage 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.

Page 26Chapter 5Illustrated Examples

 Yes

Form 4563 (Revised August 2019), Exclusion of Income for Bona Fide Residents of American Samoa

Form 4563

Exclusion of Income for Bona Fide Residents

OMB No. 1545-0074

(Rev. August 2019)

of American Samoa

Department of the Treasury

▶ Attach to Form 1040 or 1040-SR.

Attachment

563

▶ Go to www.irs.gov/Form4563 for the latest information.

Sequence No.

Internal Revenue Service

Name(s) shown on Form 1040 or 1040-SR

Your social security number

John Black

111-00-1111

Part I

General Information

1

Date bona de residence began ▶ 6-2-2019

, and ended ▶ not ended

2 Type of living quarters in

Rented room

 Rented house or apartment

American Samoa

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? ▶

4aDid you maintain any home(s) outside American Samoa?................. 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. ▶ 800 Kennedy Street, Ft. Lauderdale, FL, rental condominium, Bob Wilson, unrelated

5Name and address of employer (state if self-employed) ▶ Samoa Products Co., Pago Pago, American Samoa

6. Complete columns (a) through (d) below for days absent from American Samoa during the tax year.

(a) Date left	(b) Date	(c) Number of	(d) Reason for absence
	returned	days absent

11-11-2020	11-25-2020	14	Vacation to New Zealand

Part II		Figure Your Exclusion. Include only income that quali es for the exclusion. See instructions.
7	Wages, salaries, tips, etc. . . . . . . . . . . . . . . . . . . . . . . . . .			7	24,000
8	Taxable interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			8
9	Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .			9	220
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	24,220
For Paperwork Reduction Act Notice, see instructions.			Cat. No. 12909U	Form	4563 (Rev. 8-2019)

Chapter 5Illustrated ExamplesPage 27

2020 Form 5074, Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands

Form5074

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

Tracy Grey

Your social security number

111-00-2222

Part IIncome 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	20,000
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 bene ts (taxable amount) . . . . . . . . . . . . . . .		14
15	Other income. List type and amount		15
16	Total income. Add lines 1 through 15 . . . . . . . . . . . . . . .		16	20,000
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......................

18. Certain business expenses of reservists, performing artists, and fee-basis government

	of cials . . . . . . . . . . . . . . . . . . . . . . . . . .
19	Health savings account deduction . . . . . . . . . . . . . . . . .
20	Moving expenses for members of the armed forces . . . . . . . . . . .
21	Deductible part of self-employment tax . . . . . . . . . . . . . . .
22	Self-employed SEP, SIMPLE, and quali ed plans . . . . . . . . . . . .
23	Self-employed health insurance deduction . . . . . . . . . . . . . .
24	Penalty on early withdrawal of savings . . . . . . . . . . . . . . . .
25	IRA deduction . . . . . . . . . . . . . . . . . . . . . . . .
26	Student loan interest deduction . . . . . . . . . . . . . . . . . .
27	Tuition and fees deduction. See instructions . . . . . . . . . . . . . .
28	Charitable contributions. See instructions . . . . . . . . . . . . . . .
29	Add lines 17 through 28 . . . . . . . . . . . . . . . . . . . . .
30	Adjusted gross income. Subtract line 29 from line 16 . . . . . . . . .

17

18

19

20

21

22

23

24

25

26

27

28

29

30

1,413

1,413

18,587

Part IIIPayments of Income Tax to Guam or the CNMI

31 Payments on estimated tax return led with Guam or the CNMI . . . . . . .

31

1,409

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	1,409
For Paperwork Reduction Act Notice, see the Instructions for Forms 1040 and 1040-SR.	Cat. No. 42243X		Form 5074 (2020)

Page 28Chapter 5Illustrated Examples

2020 Form 8689, Allocation of Individual Income Tax to the U.S. Virgin Islands

	8689		Allocation of Individual Income Tax				OMB No. 1545-0074


Form			to the U.S. Virgin Islands
							2020
Department of the Treasury			Attach to Form 1040 or 1040-SR.
			Go to *www.irs.gov/Form8689* for the latest information.				Attachment
Internal Revenue Service							Sequence No. 869
Name(s) shown on Form 1040 or 1040-SR				Your social security number
	Juan and Carla Moreno				222-00-2222
Part I		Income From the U.S. Virgin Islands (USVI)
1	Wages, salaries, tips, etc. . . . . . . . . . . . . . . . . . . . . . . . .			.		1
2	Taxable interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .			.		2	500
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	6,200
12	Farm income or (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .			.		12
13	Unemployment compensation . . . . . . . . . . . . . . . . . . . . . . .			.		13
14	Social security bene ts (taxable amount) . . . . . . . . . . . . . . . . . . .			.		14
15	Other income. List type and amount					15
16	Add lines 1 through 15. This is your total USVI income . . . . . . . . . . . . . .				16		6,700

Part IIAdjusted Gross Income From the USVI

17Educator expenses...................

18. Certain business expenses of reservists, performing artists, and fee-basis government of cials

19Health savings account deduction..............

20. Moving expenses for members of the armed forces . . . . . . . . .

21Deductible part of self-employment tax .............

22. Self-employed SEP, SIMPLE, and quali ed plans . . . . . . . . . .

23	Self-employed health insurance deduction . . . . . . . . . . . .
24	Penalty on early withdrawal of savings . . . . . . . . . . . . .
25	IRA deduction . . . . . . . . . . . . . . . . . . . . .
26	Student loan interest deduction . . . . . . . . . . . . . . .
27	Tuition and fees deduction. See instructions . . . . . . . . . . .
28	Charitable contributions. See instructions . . . . . . . . . . . .
29	Add lines 17 through 28 . . . . . . . . . . . . . . . . . . .
30	Subtract line 29 from line 16. This is your USVI adjusted gross income . . .

Part IIIAllocation of Tax to the USVI

17

18

19

20

21

22

23

24

25

26

27

28

.......

......

29

30

6,700

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	.	122
36	Multiply line 33 by line 35. This is your tax allocated to the USVI . . . .		. . .		.....	36		554
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	400
39	Amount paid with Form 4868 (extension request) . . . . . . . . . .			39
40	Add lines 37 through 39. These are your total payments to the USVI . . .		. . .		....	40		400

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	400
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	154

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	154
For Paperwork Reduction Act Notice, see your tax return instructions.	Cat. No. 64603D		Form 8689 (2020)

Chapter 5Illustrated ExamplesPage 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.

Page 30Chapter 6How To Get Tax Help

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.

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

Chapter 6How To Get Tax HelpPage 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.

Page 32Chapter 6How To Get Tax Help

	To help us develop a more useful index, please let us know if you have ideas for index entries.

Index
	See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

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

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

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

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

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

Publication 570 (2020)

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

5074

15

, 17

P

5074,

26, 28

illustrated example

8689

19

Paying your taxes 25

8689,

illustrated example

26

,

29

Penalty:

8898

7

A (Form 1040 or

Failure to report change in

Schedule

residency status 7

1040-SR)

23

Pension income 9

Schedule SE

(Form 1040 or

Permanent home

5

1040-SR)

24

of

Personal property:

Form 8938,Statement

Sales or other dispositions of

9

Specified Foreign Financial

Personal service income 8, 9

Assets,

2

Presence test 4

Fringe benefits

9

Child, defined

4

Nonresident aliens 4

Qualifying medical

5

treatment

G

Significant connection:

government employees,

Permanent home 5

U.S. (See specific territory)

Territory, days in 4

Grants 10

U.S., days in 4

18

Prizes 10

Guam 17,

Form

17

5074

Publications

(See Tax help)

Puerto Rico 13–15

Additional

child tax credit 15

I

Bona fide residence:

Income:

Year of move 7

Awards and prizes 10

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

U.S. Virgin Islands

18–20

income 9

Form 1040INFO

Investment

Labor or personal services 8, 9

19

Pensions 9

Form 4868

20

Labor or personal services 8, 9

Pensions

9

Form 8689

Sales or other dispositions of

19

Sales or other dispositions of

property 9, 10

property 9, 10

Scholarships

and

fellowships 10

V

Scholarships

fellowships 10

and

Services performed partly within

a territory 8, 9

Virgin Islands, U.S.

18–20

Services performed partly within

a territory 8, 9

U.S. Armed Forces 8

U.S. income rule 8

U.S. Armed Forces 8

W

U.S. income rule 8

Special rules for

What's New:

U

filing (See specific territory)

Increase in and modification of

Special rules for gains from

U.S. Armed Forces:

the additional child tax credit

dispositions of certain

(See also specific territory)

(ACTC)

2

property

9

Bona fide residence

3

Maximum income subject to

Standard deduction

23

Earned income credit

22

social security tax 1

Source of income 8

Optional methods to figure net

, 18, 20

earnings

1

Spouse 4, 8, 14, 16

T

U.S. government

Standard deduction amount

Tables:

employees (See specific

increased 1

U.S. filing requirements for most

territory)

When to file:

taxpayers (Table 4-1) 21

U.S. income rule 8

(See also specific territory)

U.S. source of income

income

U.S. return

21

U.S. return, territory

(Table 2-1) 8

excluded on 22–24

Where To File:

Tax help 30

Credits:

(See also specific territory)

Tax home

6

Earned income credit

22

U.S. return

22

Exceptions

6

Foreign tax credit

24

file (See specific

Which return to

government

officials 6

Deductions:

territory)

Seafarers

6

IRA contribution 23

Who must file:

Students

Itemized deductions

23

(See also specific territory)

6

Moving expenses

23

U.S. return

21

Year of move 6, 7

Service 2

Taxpayer Advocate

Self-employment tax,

Territories, list of 3

one-half of 23

Territory source

23

income 7–11

Standard deduction

Awards and prizes 10

U.S. return with excluded

Effectively connected

income 23

income 10, 11

U.S. taxation

of territory income,

Grants 10

to get information on 3

Page 34Publication 570 (2020)

Enter amount from Form 1040 or 1040-SR, line 24 . . . . . . . . . . . . . . . . .

Enter total of certain amounts from Form 1040 or 1040-SR. See instructions on page 4 for amount to enter

Subtract line 32 from line 31 . . . . . . . . . . . . . . . . . . . . . . . .

Enter amount from Form 1040 or 1040-SR, line 11 . . . . . . . . .