Filing U.S. Tax Returns

If you do not qualify for the possession exclusion, you must generally file a U.S. income tax return if your gross income was at least the amount shown below.

Filing status:		Gross income of at least:
Single		$7,700
Married, filing jointly		13,850
Married, filing separately		3,000
Head of household		9,900
Qualifying widow(er)		10,850

If you were age 65 or over at the end of 2002, and you do not qualify for the possession exclusion, the minimum income levels for filing a return are higher. For these amounts, see the instructions for Form 1040.

Some persons (such as those who can be claimed as a dependent on another person's return) must file a tax return even though their gross income is less than the amount shown above for their filing status. For more information, see the instructions for Form 1040.

Bona fide residents of American Samoa.    If you qualify for the possession exclusion and all of your income is from sources in American Samoa, Guam, or the CNMI, or is effectively connected with your trade or business in these possessions, you do not have to file a U.S. income tax return.

If you qualify for the possession exclusion and you have income from sources outside American Samoa, Guam, or the CNMI, you must file a U.S. income tax return if your gross income is at least the amount shown on line 3 of the following worksheet.

1.	Enter the allowable standard deduction you figured earlier under Deductions and Credits.
2.	Personal exemption. (If your filing status is married filing jointly, enter $6000. Otherwise, enter $3,000.)
3.	Add lines 1 and 2. You must file a U.S. income tax return if your gross income from sources outside American Samoa, Guam, and the CNMI is at least this amount.

Example.   Regina Gray, a U.S. citizen, uses a calendar tax year. She was employed in American Samoa from July 2001 to January 2003. Her 2002 income consisted of her salary from her job plus interest of $500 on deposits in a U.S. bank.

Regina does not have to file a U.S. income tax return for 2002 because she can claim the possession exclusion, and her U.S. income is below the amount that would require her to file a U.S. tax return.

Form 4563.   If you must file a U.S. income tax return and you qualify for the possession exclusion, claim the exclusion by attaching Form 4563 to Form 1040. Form 4563 cannot be filed by itself. There is an example of a filled-in Form 4563 near the end of this publication.

If you must file a U.S. income tax return, you may be able to file a paperless return using IRS e-file. See your form instructions or visit our web site at www.irs.gov.

When and Where 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 Saturday, Sunday, or legal holiday, your tax return is due on the next business day.

For this purpose, a legal holiday is a legal holiday in the District of Columbia or in the state where the return is required to be filed. It does not include a legal holiday in a foreign country, unless it is also a legal holiday described in the previous sentence.

Federal tax returns mailed by taxpayers are filed on time if they bear an official postmark dated on or before the due date, including any extensions. If you use a private delivery service designated by the IRS, the postmark date generally is the date the private delivery service records in its database or marks on the mailing label. See your form instructions for a list of designated private delivery services.

Extensions of time to file.    If you live outside the United States and Puerto Rico and have your main place of business or post of duty outside the United States and Puerto Rico on the regular due date of your return, you are automatically granted a 2-month extension to file your return. If you file on a calendar year basis, you have until June 15. This extension is also available if you are on military duty outside the United States and Puerto Rico. Your assigned tour of duty outside the United States and Puerto Rico must include the entire due date of your return.

If you use this automatic 2-month extension, you must attach a statement to your return showing that you qualify for it. You must pay interest on any unpaid tax from the original due date (April 15 if you file a calendar year return) to the date you pay the tax.

Married persons.   If you and your spouse file a joint return, only one of you needs to meet the qualifications discussed above to take advantage of the automatic extension to June 15 for filing your tax return.

If you file separate returns instead of a joint return, only the spouse who meets the qualifications can use the automatic extension.

4-month extension.    You can get an automatic 4-month extension of time to file your tax return by doing one of the following by the due date for filing your return.

• E-file by phone. You can do this only during the period of February 13 - April 15.
• E-file using your personal computer or a tax professional.
• E-file and pay by credit card. You may pay by phone or over the internet.
• File a paper Form 4868.

See Form 4868 for information on getting an extension using these options.

You must estimate your tax liability for the year and, if you think you owe tax, you can make a payment. You will be charged interest on any tax not paid by the regular due date of your return, and you may be charged a penalty for the late payment. Any payment you made with the application for extension should be entered on line 67 of Form 1040.

U.S. citizens or residents living outside the United States.   If you live outside the United States and Puerto Rico and you qualify for the automatic 2-month extension (discussed earlier), you can file a paper Form 4868 by June 15 to get an additional two months to file. Print Taxpayer Abroad across the top of Form 4868. You cannot request this extension by phone or computer.

Note.   You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file.

Extension beyond 4 months.    Further extensions of the time to file are granted only under very unusual circumstances. If you need additional time to file, apply for the extension either in a letter or by filing Form 2688. Extensions beyond the 4-month automatic extension are not granted as a matter of course. You must show reasonable cause.

Except in undue hardship cases, an application for extension on Form 2688 will not be accepted until you have taken advantage of the automatic 4-month extension.

Where to file.    If you have to file Form 1040 with the United States, and you use Form 4563 to exclude income from American Samoa, Guam, and the CNMI, file your return with the Internal Revenue Service Center, Philadelphia, PA 19255-0215. If you do not qualify for the possession exclusion, mail your return to the address shown for the possession or state in which you reside in the Form 1040 instructions.

E-file.   If you must file a U.S. income tax return, you may be able to file a paperless return using IRS e-file. See your form instructions or visit our web site at www.irs.gov.

Self-Employment Tax

A U.S. citizen who is self-employed must pay self-employment tax 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).

Your payments of self-employment tax contribute to your coverage under the social security system. Social security coverage provides you with old age, survivor, and disability benefits and hospital insurance.

The self-employment tax rate is 15.3% (12.4% social security tax plus 2.9% Medicare tax). The maximum amount of earnings subject to social security (old age, survivor, and disability insurance) tax is $84,900 for 2002. All earnings are subject to Medicare (hospital insurance) tax.

Self-employment tax form.    If you have to file Form 1040 with the United States, figure your self-employment tax on Schedule SE (Form 1040) and attach it to Form 1040.

If you are a resident of American Samoa, Guam, the CNMI, Puerto Rico, or the Virgin Islands who has net self-employment income, and you do not have to file Form 1040 with the United States, use Form 1040-SS to figure your self-employment tax.

If you are a resident of Puerto Rico, you can file Form 1040-PR instead of Form 1040-SS. Form 1040-PR is the Spanish-language version of Form 1040-SS.

Self-employment tax deduction.   You can deduct one-half of your self-employment tax on line 29 of Form 1040 in figuring adjusted gross income. This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment.

If you are a bona fide resident of American Samoa or Puerto Rico, and you exclude your self-employment income from gross income, you cannot take the deduction on line 29 of Form 1040 because the deduction is related to excluded income.

If part of your self-employment income is excluded, only 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.

Figure the tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE) by the following fraction.

Self-employment income that is not excluded

Total self-employment income (including excluded income)

Double Taxation

A mutual agreement procedure exists to settle issues where there is an inconsistency between the tax treatment by the IRS and the taxing authorities of the following possessions.

• American Samoa.
• Guam.
• Puerto Rico.
• The Virgin Islands.

These issues usually involve allocations of income, deductions, credits, or allowances between related persons, determinations of residency, and determinations of the source of income and related expenses.

Send your written request for assistance under this procedure to:

Internal Revenue Service
Director, International
Attn: Tax Treaty
1111 Constitution Avenue, N.W.
Washington, DC 20224

Your request must contain a statement that assistance is requested under the mutual agreement procedure with the possession. It must also contain all the facts and circumstances relating to your particular case. It must be signed and dated. To avoid unnecessary delays, make sure you include all of the following information.

1. Your name, address, and social security number.
2. The name, address, and social security number of the related person in the possession (if one is involved).
3. The tax year(s) in question and the Internal Revenue Service Center where your return was filed.
4. If income tax is involved, the type of income, a description of the transaction, activities, or other pertinent circumstances, and the positions taken by you and the possession tax agency.
5. The amount of the item (income, deduction, or credit) involved and the amount of tax the possession assessed or proposed to assess.
6. A description of the control and business relationships between you and the related person in the possession, if that applies.
7. The status of your tax liability for the year(s) in question and, if it applies, the status of the tax liability of the related person in the possession.
8. Whether you or the related person, if one is involved, is entitled to any possession tax incentive or subsidy program benefits for the year(s) in question.
9. Copies of any correspondence received from the possession tax agency and copies of any material you provided to them.
10. Copy of the possession tax return(s) for the year(s) in question.
11. Whether a foreign tax credit was claimed on your federal tax return for all or part of the possession tax paid or accrued on the item in question.
12. Whether your federal return or the return of the related person, if there is one, was examined, or is being examined.
13. A separate document signed and dated by you that you consent to the disclosure to the designated possession tax official of any or all of the items of information set forth in, or enclosed with, the request for assistance under this procedure.

Credit or refund.    In addition to the tax assistance request, if you seek a credit or refund of any overpayment of United States tax paid on the income in question, you should file a claim on Form 1040X, Amended U.S. Individual Income Tax Return. Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Attach a copy of the request to the form.

You should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax.

Filing Requirements for Individuals in U.S. Possessions

An individual who has income from Guam, the CNMI, American Samoa, the Virgin Islands, or Puerto Rico will probably have to file a tax return with the tax department of one of the possessions. It is possible that you may have to file two annual tax returns: one with the possession's tax department and the other with the U.S. Internal Revenue Service.

You should ask for forms and advice about the filing of possession tax returns from that possession's tax department and not the Internal Revenue Service. In some situations you may have to determine if you are a resident or a nonresident of a certain possession. Contact the tax department of that possession for advice about this point.

The following discussions cover the general rules for filing returns in Guam, the CNMI, American Samoa, the Virgin Islands, and Puerto Rico.

A U.S. person who becomes a resident of American Samoa, Guam, or the CNMI may be subject to U.S. tax on U.S. source income, including gain from sales of certain U.S. assets, during the 10-year period beginning when the person becomes a resident. The U.S. person will be subject to U.S. tax on any gain from the disposition of U.S. property (including appreciated stock issued by a U.S. corporation) during this period.

Guam

Guam has its own tax system based on the same tax laws and tax rates that apply in the United States.

Requests for advice about Guam residency and tax matters should be addressed to:

Department of Revenue and Taxation
Government of Guam
P.O. Box 23607
GMF, GU 96921

The telephone number is (671) 472-7471. The fax number is (671) 472-2643.

If you are a U.S. citizen with income from sources in Guam and the United States, you must file your income tax return as explained below with either Guam or the United States, but not both. You are not liable for any income tax to the jurisdiction with which you do not have to file.

If you are a resident of Guam on the last day of your tax year, you should file your return with the Department of Revenue and Taxation at the address above.

Include income on worldwide sources on the Guam return. Include any balance of tax due with your tax return.

Example.   Gary Barker was a resident of Guam during the entire year. He received wages of $20,000 paid by a private employer and dividends of $4,000 from U.S. corporations that carry on business mainly in the United States.

He must file a 2002 income tax return with the Government of Guam. He reports his total income of $24,000 on the Guam return.

If you are a resident of the United States on the last day of your tax year, you should file your return with the:

Internal Revenue Service
Philadelphia, PA 19255-0215

Include income from worldwide sources on the U.S. return. Include any balance of tax due with your tax return.

If you are neither a resident of Guam nor a resident of the United States   at the end of your tax year, you should file with Guam if you are a citizen of Guam but not otherwise a citizen of the United States (born or naturalized in Guam). If you are a U.S. citizen or resident but not otherwise a citizen or resident of Guam, you should file with the United States.

Example.   William Berry, a U.S. citizen, was employed by a private company in Guam from June 1 through December 31, 2002. He received a salary of $20,000 during that period for his work in Guam, $4,000 in dividends from U.S. corporations that carry on business mainly in the United States, and $1,000 in interest from deposits in U.S. banks. William was advised by the Guam Department of Revenue and Taxation that he was not a resident of Guam. He must file a U.S. tax return. On his U.S. tax return, he reports the $4,000 of dividends, the $1,000 of interest, and the $20,000 Guam salary in addition to any income he had in 2002 before June 1.

Joint return.   If you file a joint return, you should file it (and pay the tax) with the jurisdiction where the spouse who has the greater adjusted gross income would have to file (if you were filing separately). If the spouse with the greater adjusted gross income is a resident of Guam at the end of the tax year, file the joint return with Guam. If the spouse with the greater adjusted gross income is a resident of the United States at the end of the tax year, file the joint return with the United States. For this purpose, income is determined without regard to community property laws.

Example.   Bill White, a U.S. citizen, was a resident of the United States, and his wife, a citizen of Guam, was a resident of Guam at the end of the year. Bill earned $25,000 as an engineer in the United States. His wife earned $15,000 as a teacher in Guam. Mr. and Mrs. White will file a joint return. Because Bill has the greater adjusted gross income, they must file their return with the United States and report the entire $40,000 on that return.

U.S. military employees.    If you are a member of the U.S. Armed Forces stationed on Guam, you are not considered a resident of Guam and you must file your return with the United States. However, if you are a member of the military and a citizen of Guam, or if you are a civilian employee of the military, you are subject to the same rules described in the previous paragraphs.

Income tax withheld.    Take into account tax withheld by both jurisdictions in determining if there is tax due or an overpayment.

Payment of estimated tax.   If you have to 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 estimated tax payment is first due. Generally, you should make your quarterly payments of estimated tax to the jurisdiction where you made your original estimated tax payment. However, estimated tax payments 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 adjusted gross income would have to pay (if a separate payment were made). For this purpose, income is determined without regard to community property laws.

Example.   Bill West is single and files his return on a calendar year basis. He is a resident of the United States at the time that he must make his first payment of estimated income tax for the year. Since Bill does not expect to be a resident of Guam at the end of the year, he pays his estimated tax to the United States by April 15. Later in the year, however, Bill becomes a resident of Guam and receives income from Guam sources that causes him to refigure his estimated tax payments. The quarterly estimated tax payments must be made to the United States because he was a U.S. resident when his first payment of estimated tax was due. Because Bill is a resident of Guam at the end of his tax year, he must file his income tax return with Guam. On that return, he claims credit for the estimated tax payments made to the United States.

Early payment of estimated tax.   If you make your first payment of estimated tax early and you do not send it to the jurisdiction to which you would have sent it if you had not made it early, make all later payments to the other jurisdiction.

Example.   Lauren Post is single and files her return on a calendar year basis. On March 1, Lauren was a resident of the United States and made an early first payment of estimated income tax to the United States. She became a resident of Guam before the due date of her first payment of estimated tax (April 15), and remained a resident of Guam for the rest of the year. Lauren must make the rest of her payments of estimated tax to Guam because she is a resident of Guam on the date that her first payment of estimated tax is otherwise due. At the end of the year, Lauren will file her tax return with Guam and claim credit for all estimated tax payments on that return.

Estimated tax form.    Use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. Or, you can make your payments electronically and not have to file any paper forms. See the Form 1040-ES instructions for information on making payments.

Information return.    If your adjusted gross income from all sources is at least $50,000, your gross income consists of at least $5,000 from sources in Guam, and you file a U.S. income tax return, attach Form 5074 to Form 1040.

Note.   Guam and the United States have entered into an implementing agreement. The effective date of the agreement, however, has been indefinitely postponed. When the agreement goes into effect, the following rules may apply.

• Guam may enact its own laws for taxing residents of Guam as well as for taxing income sourced in Guam (or income effectively connected with a trade or business in Guam) and paid to a nonresident.
• Individuals who are bona fide residents of Guam and have income sourced outside Guam, the CNMI, or American Samoa may have to file a U.S. tax return.
• Individuals who are bona fide residents of Guam and have income sourced in any of the three possessions may be able to treat that income as exempt from U.S. income tax under the possession exclusion rules.

Double taxation.    A mutual agreement procedure exists to settle cases of double taxation between the United States and Guam. See Double Taxation under Filing U.S. Tax Returns, earlier.

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