Form 8689 Allocation of Individual Income Tax to the Virgin Island

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Form

8689

Department of the Treasury
Internal Revenue Service

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

OMB No. 1545-0074

2019

Attach to Form 1040 or 1040-SR.
Go to www.irs.gov/Form8689 for the latest information.
▶

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Attachment
Sequence No. 85
Your social security number

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

Part I
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Part II
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DRAFT AS OF
July 25, 2019
DO NOT FILE

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Adjusted Gross Income From the USVI

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Allocation of Tax to the USVI

Enter amount from Form 1040 or 1040-SR, line 16 . . . . . . . . . . . . . . . . .
Enter total of certain amounts from Form 1040 or 1040-SR. See instructions on page 4 for amount to enter
Subtract line 31 from line 30
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Enter amount from Form 1040 or 1040-SR, line 8b . . . . . . . . .
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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
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Multiply line 32 by line 34. This is your tax allocated to the USVI . . . . . . . . . . . .

Part IV
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Educator expenses
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Certain business expenses of reservists, performing artists, and fee-basis
government officials . . . . . . . . . . . . . . . . . . .
Health savings account deduction
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Moving expenses for members of the armed forces . . . . . . . . .
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 . . . . . . . . . . . . . . .
Reserved for future use . . . . . . . . . . . . . . . . . .
Add lines 17 through 27 . . . . . . . . . . . . . . . . . . .
Subtract line 28 from line 16. This is your USVI adjusted gross income . . .

Part III
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Income From the U.S. Virgin Islands (USVI)

Wages, salaries, tips, etc. . . . . . . . . . . . . . .
Taxable interest . . . . . . . . . . . . . . . . . .
Ordinary dividends . . . . . . . . . . . . . . . . .
Taxable refunds, credits, or offsets of local USVI 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 USVI income
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Payments of Income Tax to the USVI

Income tax withheld by the USVI . . . . . . . . . . . . . . .
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2019 estimated tax payments and amount applied from 2018 return . . .
Amount paid with Form 4868 (extension request) . . . . . . . . . .
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Add lines 36 through 38. These are your total payments to the USVI . . . . . . . . . . ▶
Enter the smaller of line 35 or line 39. Include this amount in the total on Form 1040 or 1040-SR, line
19. On the dotted line next to line 19, enter “Form 8689” and show this amount
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Overpayment to the USVI. 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 2020 estimated tax . . . .
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Amount you owe to the USVI. If line 39 is less than line 35, subtract line 39 from line 35 . . . . .
Enter the amount from line 44 that you will pay when you file your income tax return. Include this
amount in the total of Form 1040 or 1040-SR, line 19. On the dotted line next to line 19, enter “Form
8689” and show this amount . . . . . . . . . . . . . . . . . . . . . . . .

For Paperwork Reduction Act Notice, see your tax return instructions.

Cat. No. 64603D

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Form 8689 (2019)

DRAFT AS OF
July 25, 2019
DO NOT FILE
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Page 3

Form 8689 (2019)

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

Future Developments
For the latest information about developments related to
Form 8689 and its instructions, such as legislation
enacted after they were published, go to
www.irs.gov/Form8689.
At the time this form and instructions went to
print, the tuition and fees deduction had expired.
To see if this deduction has been extended so
CAUTION
you can claim it on your 2019 return, go to
www.irs.gov/FormsUpdates.

• 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, later.
Active duty U.S. Armed Forces. If you are a bona fide
resident of the USVI and are stationed outside of the USVI,
your military compensation will be sourced in the USVI
under the Servicemembers Civil Relief Act (SCRA). If you
are not a bona fide resident of the USVI but are stationed
in the USVI, however, your military compensation will not
be sourced there. For further details, see Pub. 570.
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, the
District of Columbia, or another U.S. territory, 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. 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 2019 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.

DRAFT AS OF
July 25, 2019
▲ DO NOT FILE
!
▲

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
CAUTION
USVI for the entire tax year under the 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 or
1040-SR (including Form 8689) with the Department of
the Treasury, Internal Revenue Service Center, Austin, TX
73301-0215 USA.
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 or 1040-SR (with
all attachments, forms, and schedules, including Form
8689) with the Virgin Islands Bureau of Internal Revenue,
6115 Estate Smith Bay, Suite 225, St. Thomas, VI 00802.
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 How To Get Tax Help in the Instructions for
Forms 1040 and 1040-SR.

!

Part I—Income From the U.S. Virgin Islands
(USVI)
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:

Page 4

Form 8689 (2019)

Part II—Adjusted Gross Income From the
USVI

Part IV—Payments of Income Tax to the
USVI

Lines 21 through 23. If you had USVI source selfemployment 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 Schedule 1 (Form 1040 or
1040-SR), line 22, 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 Schedule 1 (Form 1040 or
1040-SR), line 22. If you or your spouse had an Archer
MSA deduction on Schedule 1 (Form 1040 or 1040-SR),
line 22, figure the amount to report on line 28 the same way
you would an IRA deduction (see Line 25 above).
Line 31. Enter the total of the amounts from Form 1040 or
1040-SR, lines 18a, 18b, and 18c. Include the total of the
amounts from Schedule 2 (Form 1040 or 1040-SR), lines
4, 5a, and 7a. Also 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 Schedule 2 (Form 1040 or
1040-SR), line 10. Also include any amount from Form
5329, Parts III, IV, V, VI, VII, VIII, or IX reported on
Schedule 2 (Form 1040 or 1040-SR), line 6. Also include
the total of the amounts from Schedule 3 (Form 1040 or
1040-SR), lines 13b and 13d.

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.
Line 45. Enter the amount you owe to the USVI that you
will pay when you file your income tax return.
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 or 1040-SR. Add line 40 and line 45 of
Form 8689 and include the amount in the total on Form
1040 or 1040-SR, line 19. On the dotted line next to line
19, enter “Form 8689” and the amount paid.

DRAFT AS OF
July 25, 2019
DO NOT FILE

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.