income tax

This seems to be a subject of much debate, even amongst the IRS/IRB.....I have talked with 3 IRS agents this week and gotten 3 answers, so I made note of the one I liked the best and am going with that.

IF you live in the VI more than 183 days out of the year, you are considered a bona fide Virgin Islands resident as long as your primary activities remain in the VI - but if you're still maintaining a home stateside, that all goes down the tubes and you start on another calculation.

Full year VI residents pay to the IRB - same tax base as the IRS, but to the VI gov't. The 183 day rule for filing if you lived there only part of the year and are a bona fide resident gets muddled even further in that you have to allocate the portion of the income earned stateside versus that in the VI. Very, very complicated and a pain in the butt.

If you search the forum under income tax or IRB or something along those lines, you will find more info.

VI source income requires taxes paid to the usvi. Stateside source income usually requires taxes paid to IRS/fed. Ours is more interesting..Mr Beachy is stateside resident, I am VI resident, we file jointly.
We were also targeted for a special look-through, because of all the EDC problems..and then the Feds decided they wanted me to pay them for the VI income I had received from my M-F, 9-5 job working on stx...which had been paid and reported on W-2VI, paid to VI.
FYI...the VI has someone on staff at IRB who serves as an intermediary of sorts, and will help deal with IRS issues that arise for VI residents. Can't remember her name, as I finally got someone at IRS who actually listened to my story, and the light dawned....

It also gets complicated if you are self-employed in the islands. You would then pay gross receipts taxes to the BIR of the USVI, pay self-employment taxes to the IRS on the mainland, and if there is any other income tax due from island business activities that exceeds your self-employment tax total, you pay that to the BIR of the USVI. They don't tell you that ahead of time and expect you to figure it out on your own plus nobody seems to know which forms to file where to break out the $$ to different places without everyone winding up seriously confused.

Hello,

Yes, just like working/living in one of the states (US), we do pay income taxes as well as Medicare and SS. The amount tables/formulas are the same as the federal gov. outlines. The filing dates are the same too. Income tax however is paid to the Virgin Islands Bureau of Internal Revenue.

As BeckyR & Beachy indicated things do get confusing when you have income here and income from elsewhere, or lived part of tax year here and part somewhere else. The IRS has information on their website that you can explore to get a better understanding of income tax in the USVI and the bonafide resident topic, here is a link http://www.irs.gov/publications/p570/index.html.

--Islander

I would recommend sitting down with a CPA in the beginning. Even if you mostly do your own taxes, it's worth paying for a consultation now and then. Otherwise, you're going to guess wrong a lot.

Some tid-bits I learned, as a self-employed person:

- Avoid paying the gross receipts tax on money for which you're being reimbursed by having that money paid to you separately from your other receipts.

- Pay your self-employment tax to the IRS, not to the IRB. Pay your income tax to the IRB. That applies to quarterly estimated tax payments too. Zero out the SE Tax (line 58) on form 1040 in order to do this.

- Hand in your annual and quarterly tax and gross receipts filings in person at the local IRB office. Bring the original and a copy. Have them stamp and return the copy as proof of receipt. You'll need it when you apply for or renew your business license, as proof that your payments and filings are current.

- "Source income" does not just mean the income came from a given state or territory. It means you also did business there. So if you have stateside clients, but did all the work from the VI, you don't have to file returns in those states. This is a general issue that tripped me up. It's not an oddity of the VI.

well said STXBob!
I went back & forth this year 2 X, as I put a figure in line 58, yup, 0 is the correct answer(to the local IRB).The federal phone tax, you can`t claim it either even if Turbo tax says so.
Yup, you need stamped copies of everything.
You pretty much covered it.
beachy, didn`t know there was someone here locally to help when your self employed, & things get confused.
Some of my friends have used a Taxpayer Advocate, that for instance,immediately stops the penalties/fees.

So a pension check from the mainland doesn't count as source income from that state, but rather VI income if you live in the VIs? And must this be prorated if you only spend 65% of your time on island?

Ric and I live on STX full time and I receive a pension from the state of Kentucky. That pension counts 100% as income for us and we pay VI tax only. .

thanks linda

I guess this could be used as further evidence that I am a little dense, but could you elaborate on the self-employment tax issue. I split up our estimated tax based on a formula I found in an IRS Publication and sent the SE potion to the states and paid the income tax portion at the IRB each quarter. When I did our income tax (using TurboTax) I put the actual amount paid on line 58 on Form 1040. Why is this not correct?

JE: If you let TurboTax calculate line 58 for you, and then you sent that amount to the IRS, and then you zeroed out line 58, you did it right (assuming you live in the VI). Anything else might be wrong.

If "I put the actual amount paid on line 58" refers to the estimated tax payments you made earlier, that's wrong, unless it happens to equal the amount TurboTax also calcaluted that you should pay.