Form 8689 Allocation of Individual Income Tax to the Virgin Island

Form

8689

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

Department of the Treasury
Internal Revenue Service

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OMB No. 1545-0074

2011

Attachment
Sequence No. 85
Your social security number

Attach to Form 1040.

Name(s) shown on Form 1040

Part I
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Part II
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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 . . . . . . . .

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Adjusted Gross Income From the U.S. Virgin Islands

Educator expenses
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Certain business expenses of reservists, performing artists,
fee-basis government officials . . . . . . . . . . . .
Health savings account deduction
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Moving expenses . . . . . . . . . . . . . . . .
Deductible part 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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Allocation of Tax to the U.S. Virgin Islands

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Enter amount from Form 1040, line 61

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Enter the total of the amounts from Form 1040, lines 56, 57, 59a, 64a, 65, 66, 67, and 71 (boxes b,
c, and d). Include any uncollected social security and Medicare or tier 1 RRTA tax, tax on excess
golden parachute payments, or excise tax on insider stock compensation reported on line 60. Also
include any amount from Form 5329, Parts III, IV, V, VI, VII, or VIII reported on Form 1040, line 58 .
Subtract line 31 from line 30
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Enter amount from Form 1040, line 38 . . . . . . . . . . .
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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
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Part IV
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Payments of Income Tax to the U.S. Virgin Islands

Income tax withheld by the U.S. Virgin Islands . . . . . . . . .
36
2011 estimated tax payments and amount applied from 2010 return .
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Amount paid with Form 4868 (extension request) . . . . . . . .
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Add lines 36 through 38. These are your total payments . . . . . . . . . . . . . ▶
Enter the smaller of line 35 or line 39. Also, include this amount in the total on Form 1040, line 72.
On the dotted line next to line 72, enter “Form 8689” and show this amount . . . . . . . .
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 . . . . . . . . . . . . . . . . . ▶
Amount of line 41 you want applied to your 2012 estimated tax . .
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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 72. Next to line 72, enter “Form 8689” and the amount paid . . . ▶

For Paperwork Reduction Act Notice, see Form 1040 instructions.

Cat. No. 64603D

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Form 8689 (2011)

Page 2

Form 8689 (2011)

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

Instructions
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.
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
CAUTION special rules for the year of a move (see chapter 1 of
Pub. 570, Tax Guide for Individuals With Income From U.S.
Possessions).
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. If you are not enclosing a check or money order, file your
original Form 1040 (including Form 8689) with the Department of the
Treasury, Internal Revenue Service Center, Austin, TX 73301-0215 USA.

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If you are including a check or money order, file your original return
with the Internal Revenue Service, P.O. Box 1303, Charlotte, NC
28201-1303 USA.
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, 6115 Estate Smith Bay, 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 and 937, Regulations section
1.937-2, and 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.
However, certain income earned while temporarily performing services
in the USVI will not be considered USVI source income. For details, see
De minimis exception on this page.
Military spouses. If you are the civilian spouse of a member of the
U.S. Armed Forces, work in the USVI, and retain a residence or domicile
in one of the 50 states or the District of Columbia under the Military
Spouses Residency Relief Act (MSRRA), your wages, salaries, tips, and
self-employment income will not be considered income from the USVI.
Under MSRRA, the military spouse must be in the USVI solely to be with
his/her servicemember spouse who is serving in compliance with
military orders. MSRRA applies to qualified individuals for the 2009
calendar year or subsequent years. For details on MSRRA, see Pub.
570.
• 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 include
only 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 any interest in real property) is generally 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.
De minimis exception. This is an exception to the general rule for
determining the source of income earned in the USVI. Generally, income
from the USVI does not include compensation for services performed in
the USVI if during 2011 you:
• Were a U.S. citizen or resident,
• Were not a bona fide resident of the USVI,
• Were not employed by or under contract with an individual,
partnership, or corporation that is engaged in a trade or business in the
USVI,
• Temporarily performed services in the USVI for 90 days or less, and
• Earned $3,000 or less from such services.
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
CAUTION when they became a bona fide resident. For details, see
Special Rules for Gains From Dispositions of Certain Property, in
chapter 2 of Pub. 570, Regulations section 1.937-2(f)(1), and Examples 1
and 2 of section 1.937-2(k).

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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 72. On the dotted line
next to line 72, enter “Form 8689” and the amount paid.

Penalty for Failure To Furnish Information
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. 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. For details, see
the Instructions for Form 8898.