8689 Allocation of Individual Income Tax to the U.S. Virgin I

Form

8689

OMB No. 1545-0074

Allocation of Individual Income Tax
to the U.S. Virgin Islands

Department of the Treasury
Internal Revenue Service

©

2008

Attachment
Sequence No.

Attach to Form 1040.

Part I
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Income From the U.S. Virgin Islands

Wages, salaries, tips, etc.
Taxable interest
Ordinary dividends
Taxable refunds, credits, or offsets of local U.S. Virgin Islands income taxes
Alimony received
Business income or (loss)
Capital gain or (loss)
Other gains or (losses)
IRA distributions (taxable amount)
Pensions and annuities (taxable amount)
Rental real estate, royalties, partnerships, S corporations, trusts, etc.
Farm income or (loss)
Unemployment compensation
Social security benefits (taxable amount)
Other income. List type and amount ©
Add lines 1 through 15. This is your total income

Part II

Educator expenses

18

Certain business expenses of reservists, performing artists, and
fee-basis government officials
Health savings account deduction
Moving expenses
One-half of self-employment tax
Self-employed SEP, SIMPLE, and qualified plans
Self-employed health insurance deduction
Penalty on early withdrawal of savings
IRA deduction
Student loan interest deduction
Tuition and fees deduction
Add lines 17 through 27
Subtract line 28 from line 16. This is your adjusted gross income

Part III

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1
2
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28
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Adjusted Gross Income From the U.S. Virgin Islands

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29

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Allocation of Tax to the U.S. Virgin Islands
30

30

Enter amount from Form 1040, line 61

31

Enter the total of the amounts from Form 1040, lines 57, 58, 60 (box b), 64a, 66, and 68 (box c). Include any uncollected
social security and Medicare or tier 1 RRTA tax, tax on golden parachute payments, or excise tax on insider stock
compensation reported on line 61. Also include any amount from Form 5329, Parts III, IV, V, VI, VII, or VIII reported on
line 59

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35

Subtract line 31 from line 30
33
Enter amount from Form 1040, line 38
Divide line 29 above by line 33. Enter the result as a decimal (rounded to at least 3 places). Do not enter more than 1.000
Multiply line 32 by line 34. This is your tax allocated to the U.S. Virgin Islands

Part IV

85

Your social security number

Name(s) shown on Form 1040

31
32
34
35

3

.

Payments of Income Tax to the U.S. Virgin Islands
36
37
38

36
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38
39
40

Income tax withheld by the U.S. Virgin Islands
2008 estimated tax payments and amount applied from 2007 return
Amount paid with Form 4868 (extension request)
Add lines 36 through 38. These are your total payments

41
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44

Overpayment to the U.S. Virgin Islands. If line 39 is more than line 35, subtract line 35 from line 39
©
Amount of line 41 you want refunded to you
43
©
Amount of line 41 you want applied to your 2009 estimated tax
Amount you owe to the U.S. Virgin Islands. Subtract line 39 from line 35. Enter the amount that you
are paying here and on Form 1040, line 71. Next to line 71, enter “Form 8689” and the amount paid ©

©

Enter the smaller of line 35 or line 39. Also, include this amount in the total on Form 1040, line 71. On
the dotted line next to line 71, enter “Form 8689” and show this amount

For Paperwork Reduction Act Notice, see back of form.

Cat. No. 64603D

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Form

8689

(2008)

Form 8689 (2008)

Section references are to the Internal Revenue Code unless otherwise
noted.

Instructions
Reminder. If, in tax year 2001 or later, you became or ceased to be a bona
fide resident of a U.S. possession, you may be required to file Form 8898,
Statement for Individuals Who Begin or End Bona Fide Residence in a U.S.
Possession. The penalty for failure to provide the required information is
$1,000. For details, see the Instructions for Form 8898.
Purpose of form. Use Form 8689 to figure the amount of U.S. tax
allocable to the U.S. Virgin Islands (USVI).
Who must file. If you were a U.S. citizen or resident alien (other than a
bona fide resident of the USVI) and had income from sources in the USVI
or income effectively connected with the conduct of a trade or business in
the USVI, you may owe tax to the USVI. Your USVI tax liability is a
percentage of your U.S. tax liability.

CAUTION

Do not use this form if you were a bona fide resident of the
USVI during the entire tax year, or were considered a bona
fide resident of the USVI for the entire tax year under the
special rules for the year of a move (see Pub. 570, chapter 1).

Joint returns. If you file jointly and only one spouse is a bona fide
resident of the USVI for the entire tax year, the resident status for both
spouses and subsequent tax treatment is determined by the spouse with
the higher adjusted gross income (AGI) (disregarding community property
laws). File Form 8689 only if the spouse with the higher AGI is not a bona
fide resident of the USVI for the entire tax year.
Where to file. You must file identical tax returns with the United States
and the USVI. File your original Form 1040 (including Form 8689) with the
Department of the Treasury, Internal Revenue Service Center, Austin, TX
73301-0215.
File a signed copy of your Form 1040 (with all attachments, forms, and
schedules, including Form 8689) with the Virgin Islands Bureau of Internal
Revenue, 9601 Estate Thomas, Charlotte Amalie, St. Thomas, VI 00802.
They will accept a signed copy of your U.S. return and process it as an
original return.
Additional information. Pub. 570 has more information and an example of
how to complete Form 8689. To get Pub. 570, see Quick and Easy Access
to Tax Help and Tax Products in the instructions for Form 1040.

Part I—Income From the U.S. Virgin Islands
Source of income. The rules for determining the source of income are
explained in sections 861 through 865, section 937, in Regulations section
1.937-2 and in chapter 2 of Pub. 570. Some general rules are:
● The source of wages, salaries, or tips is generally where the services are
performed. If you worked both in and outside the USVI, include on line 1
only wages, salaries, or tips earned while you were in the USVI.
● The source of interest income is generally where the payer is located.
For example, interest from a certificate of deposit issued by a USVI bank
or a USVI branch of a U.S. bank is USVI source income.
● Generally, dividends are sourced where the paying corporation is
created or organized.
● Taxable refunds, credits, or offsets of local USVI income taxes only
include nonmirror code income taxes.
● Alimony received from a person who is a bona fide resident of the USVI
is USVI source income.
● Except as provided in regulations, income earned after December 31,
2004, that is from sources within the United States or effectively
connected with the conduct of a trade or business in the United States is
not income from the USVI.
● The source of gains, profits, or income from the sale or disposition of
real property (and interest in real property) are generally sourced where the
real property is located.
Personal property. The source of income from the sale of
nondepreciable personal property is generally the seller’s residence. For
example, if you are a bona fide resident of the USVI, gain from the sale or
disposition of personal property is generally from sources within the USVI.
Income from the sale of inventory is generally sourced where the title to
the property passes. See section 865 for details.

Page

2

Special rules may apply to bona fide residents of U.S.
possessions who have gain from dispositions of certain
investment property within the 10-year period beginning when
CAUTION
they became a bona fide resident. For details, see chapter 2 of
Pub. 570, Regulations section 1.937-2(f)(1), and Examples 1 and 2 of
section 1.937-2(k).

Part II—Adjusted Gross Income From the
U.S. Virgin Islands
Lines 21 through 23. If you had USVI source self-employment income,
figure the amount to enter on each line by (1) dividing your USVI source
self-employment income by your total (worldwide) self-employment
income, and (2) multiplying the total amount of each deduction that applies
to you by the result in (1).
Line 24. Enter the amount of penalty on early withdrawals from savings
accounts in USVI banks or USVI branches of U.S. banks. The Form
1099-INT or Form 1099-OID you received will show the amount of any
penalty you were charged.
Line 25. Enter the total of your and your spouse’s IRA deductions
attributable to USVI compensation or earned income. Figure the amount to
report on line 25 by (1) dividing your USVI compensation or earned income
by your total (worldwide) compensation or earned income, and (2)
multiplying the amount of your IRA deduction by the result in (1). Figure the
amount of your spouse’s IRA deduction the same way.
Line 28. Include in the total on line 28 the amount of any other deductions
included on Form 1040, line 36, that are attributable to your USVI income.
On the dotted line next to line 28, enter the amount of each deduction
attributable to your USVI income and identify it as you did on Form 1040,
line 36. If you or your spouse had an Archer MSA deduction on Form 1040,
line 36, figure the amount to report on line 28 the same way you would an
IRA deduction (see Line 25, above).

Part IV—Payments of Income Tax to the
U.S. Virgin Islands
Amounts overpaid to the United States generally will not be applied to the
amount you owe to the USVI. Similarly, amounts overpaid to the USVI will
not be applied to the amount you owe to the United States.
Credit for U.S. tax paid to the USVI. You can take a credit on your U.S.
return for the U.S. tax allocated to the USVI only if you actually paid the tax
to the USVI. To take the credit, you must complete Form 8689 and attach
it to your Form 1040. Add line 40 and line 44 of Form 8689 and include the
amount in the total on Form 1040, line 71. On the dotted line next to line
71, enter “Form 8689” and the amount paid.

Penalty for Failure To Furnish Information
If you fail to provide the required information, you may have to pay a
$1,000 penalty for each failure unless you can show the failure was due to
reasonable cause and not willful neglect. This penalty is in addition to any
criminal penalty provided by law.
Paperwork Reduction Act Notice. We ask for the information on this
form to carry out the Internal Revenue laws of the United States. You are
required to give us the information. We need it to ensure that you are
complying with these laws and to allow us to figure and collect the right
amount of tax.
You are not required to provide the information requested on a form that
is subject to the Paperwork Reduction Act unless the form displays a valid
OMB control number. Books or records relating to a form or its instructions
must be retained as long as their contents may become material in the
administration of any Internal Revenue law. Generally, tax returns and
return information are confidential, as required by section 6103.
The average time and expenses required to complete and file this form
will vary depending on individual circumstances. For the estimated
averages, see the instructions for your income tax return.
If you have suggestions for making this form simpler, we would be
happy to hear from you. See the instructions for your income tax return.