Individuals living or working in a U.S. Territory

If you have income from American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), Guam, Puerto Rico or the U.S. Virgin Islands, you may have to file a U.S. tax return only, a territory tax return only, or both returns. This generally depends on whether you are considered a bona fide resident of that territory. In some cases, you may have to file a U.S. return, but be able to exclude income earned in a territory from U.S. tax. Filing requirements for specific U.S. territories are explained in Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.

For forms and advice on filing a territory tax return, contact that territory's tax department. The addresses and telephone numbers for the tax departments of the U.S. territories may be found in Publication 570, Tax Guide for Individuals With Income From U.S. Possessions. Additional information about the U.S. territories can be found at State and local government resources page.

Determining residency status in U.S. territories

Internal Revenue Code (IRC) section 937 establishes the criteria for determining the residency of an individual in American Samoa, the CNMI, Guam, Puerto Rico, and the U.S. Virgin Islands, and for determining whether income is sourced in a U.S. territory. An individual is generally considered a bona fide resident of a U.S. territory if they (1) are physically present in the territory for 183 days during the taxable year, (2) do not have a tax home outside the territory during the tax year, and (3) do not have a closer connection to the U.S. or a foreign country. However, U.S. citizens and resident aliens are permitted certain exceptions to the 183-day rule. For a detailed explanation of the U.S. territory residency rules and income sourcing rules, please refer to Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.

IRC 937 also establishes the filing requirement for Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, for individuals who became or ceased to be a bona fide resident of a U.S. Territory. If you are required to file Form 8898 for any tax year and fail to file it, you may be subject to a penalty of $1,000.

Individuals who are required to file Form 8898 generally must do so by the due date (including extensions) for filing Form 1040 or Form 1040-NR. Form 8898 must be filed by itself; do not file it with Form 1040 or Form 1040-NR. Refer to Residents of U.S. possessions - Form 8898 bona fide residence for more information.

Self-employment tax

A U.S. citizen who is self-employed in a U.S. territory 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.

If you are a resident of American Samoa, the CNMI, Guam, Puerto Rico, or the U.S. 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, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico), or its Spanish Language version Form 1040-SS (sp), to report your self-employment tax. These forms must be filed with the U.S. Internal Revenue Service at the address shown in the instructions.

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court cases filed on or after May 1, 1986, visit the Opinions Search page of the United States Tax Court.