A U.S. citizen or resident alien who is not bona fide resident of the U.S. Virgin Islands may owe tax to the USVI if they had income either from sources in the USVI or effectively connected with the conduct of a trade or business in the USVI. This tax liability is calculated as a percentage of their U.S. tax liability.
Form 8689 is use to figure the amount of U.S. tax allocable to the USVI.
Note that a bona fide resident of the USVI doesn't file Form 8689 but rather files a tax return directly with the USVI.
To access the Form 8689 in TaxSlayer Pro, from the main menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Other Payments or Refundable Credits
- Virgin Island Tax Allocation (8689)
- Total Income - Enter the USVI-sourced income. (See IRS Publication 570 for assistance in determining whether or not a particular item of income is sourced in the USVI or not.)
- Adjustments to Income - Enter the USVI-sourced adjustments, if any.
- Payments of Income Tax - Enter payments of income tax to the USVI, whether by withholdings, estimated tax payments, or paid on extension (Form 4868).
- Amount Applied to Estimated Tax - If an overpayment is calculated, enter the amount to be applied to 2023 estimated tax, if any.
To view Form 8689 while working on it, click the View button in the tool bar at the top of the program.
Note the IRS will not accept an electronically filed tax return if the taxpayer's address is in U.S. Virgin Islands (or American Samoa, Guam, or the Commonwealth of the Northern Mariana Islands). Such a return will need to be mailed.
The taxpayer will file identical tax returns with the IRS and the USVI.
Where to mail, if not e-filing
If not e-filing the tax return, file the original return including Form 8689 to one of these addresses:
A return that does not include a check or money order:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
A return that includes a check or money order:
Internal Revenue Service
PO Box 1303
Charlotte, NC 28201-1303
Filing with the USVI
File a signed copy of the tax return (with all attachments, forms, and schedules, including Form 8689) here:
Virgin Islands Bureau of Internal Revenue
6115 Estate Smith Bay
Suite 225
St Thomas, VI 00802
The Virgin Islands BIR will accept a signed copy of the taxpayer's U.S. return and process it as an original return.
Additional Information:
IRS: Instructions for Form 8689, Allocation of Individual Income Tax to the U.S. Virgin Islands
IRS: Publication 570, Tax Guide for Individuals With Income from U.S. Possessions