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

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Form 8689 — Allocation of Individual Income Tax to the U.S. Virgin Islands

Department of the Treasury — Internal Revenue Service

Attach to Form 1040. Information about Form 8689 and its instructions is at www.irs.gov/form8689.

Name(s) shown on Form 1040

Your social security number

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

1. Wages, salaries, tips, etc.

2. Taxable interest

3. Ordinary dividends

4. Taxable refunds, credits, or offsets of local USVI income taxes

5. Alimony received

6. Business income or (loss)

7. Capital gain or (loss)

8. Other gains or (losses)

9. IRA distributions (taxable amount)

10. Pensions and annuities (taxable amount)

11. Rental real estate, royalties, partnerships, S corporations, trusts, etc.

12. Farm income or (loss)

13. Unemployment compensation

14. Social security benefits (taxable amount)

15. Other income. List type and amount

16. Add lines 1 through 15. This is your total USVI income

Part II — Adjusted Gross Income From the USVI

17. Educator expenses

18. Certain business expenses of reservists, performing artists, and fee-basis government officials

19. Health savings account deduction

20. Moving expenses

21. Deductible part of self-employment tax

22. Self-employed SEP, SIMPLE, and qualified plans

23. Self-employed health insurance deduction

24. Penalty on early withdrawal of savings

25. IRA deduction

26. Student loan interest deduction

27. Tuition and fees deduction

28. Add lines 17 through 27

29. Subtract line 28 from line 16. This is your USVI adjusted gross income

Part III — Allocation of Tax to the USVI

30. Enter amount from Form 1040, line 63

31. Enter the total of the amounts from Form 1040, lines 57, 58, 60a, 66a, 67, 68, and 73 (box d)

32. Subtract line 31 from line 30

33. Enter amount from Form 1040, line 38

34. Divide line 29 above by line 33. Enter the result as a decimal

35. Multiply line 32 by line 34. This is your tax allocated to the USVI

Part IV — Payments of Income Tax to the USVI

36. Income tax withheld by the USVI

37. 2014 estimated tax payments and amount applied from 2013 return

38. Amount paid with Form 4868 (extension request)

39. Add lines 36 through 38. These are your total payments to the USVI

40. Enter the smaller of line 35 or line 39

41. Overpayment to the USVI

42. Amount of line 41 you want refunded to you

43. Amount of line 41 you want applied to your 2015 estimated tax

44. Amount you owe to the USVI

45. Enter the amount from line 44 that you will pay when you file your income tax return

Signature Section

Taxpayer signature

Date

Spouse signature

Date

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

The Allocation of Individual Income Tax to the U.S. Virgin Islands is a tax reporting and allocation process used to determine which portion of an individual's U.S.-sourced and territory-sourced income is subject to U.S. Virgin Islands tax rules. It clarifies residency status, apportions income between U.S. federal and USVI taxing authorities when applicable, and supports correct filing with the territorial Bureau of Internal Revenue and, where required, with the IRS. Preparers use allocation statements with supporting schedules to document source of income, residency dates, and credits or refunds claimed.

Why Accurate Allocation Matters for Tax Compliance

Accurate allocation ensures correct tax liability between the U.S. and the U.S. Virgin Islands, reduces audit risk, and helps taxpayers claim credits or exemptions properly.

Why Accurate Allocation Matters for Tax Compliance

Who Typically Prepares and Signs These Allocation Statements

The form and associated allocation schedules are used by resident and part-year taxpayers, payroll agents, and tax preparers to document territory-source income and residency.

  • Resident taxpayers and part-year residents who must show USVI-source income for the tax year.
  • CPAs and enrolled agents preparing combined or split federal/territory returns for clients.
  • Employers, payroll departments, and payers documenting withheld or allocated wages for reporting.

Proper completion benefits taxpayers, payers, and government reviewers by improving accuracy and reducing follow-up requests.

Step-by-Step: Completing an Allocation Statement

Follow these sequential steps to prepare, verify, and file the allocation accurately.

  • 01
    Gather Documents: Collect W-2s, 1099s, bank statements, and residency evidence.
  • 02
    Determine Residency: Confirm residency dates and status for the tax year.
  • 03
    Allocate Income: Apportion income by source and complete allocation schedules.
  • 04
    Sign and File: Obtain signatures and submit to the appropriate authority.

Where to Send Completed Allocation Forms

Choose the correct recipient based on residency and source rules to avoid processing delays or misrouted returns.

  • USVI Bureau: File allocation schedules with the U.S. Virgin Islands Bureau of Internal Revenue when claiming territory liability.
  • Internal Revenue Service: Submit federal returns to the IRS if federal filing remains required by the taxpayer's circumstances.
  • Payer/Employer: Provide completed allocation statements to employers or payers who must withhold or report.
  • Tax Preparer: Deliver signed allocation documents to the preparer for electronic filing and record retention.

Configuring an Online Workflow for Allocation Forms

Set up a digital workflow to collect data, signatures, and attachments securely and in the required order.

Field Configuration
Taxpayer Information Required, read-only after verification to prevent accidental edits
Residency Dates Field MM/DD/YYYY format with date validation
Income Attachments Allow PDF, DOCX, or image uploads up to platform limit
Signature Order Sequential signer order with signer authentication enabled

Digital Signing and Technical Requirements

Confirm platform capabilities before eSigning to ensure legal compliance and secure transmission.

  • File Formats: PDF, DOCX, and scanned images supported
  • Integrations: Connectors for accounting and document systems available
  • Authentication: Email, SMS, or stronger MFA options

eSignature Vendor Comparison for Allocation Forms

Basic vendor pricing and capability snapshot to help select an eSignature provider for secure collection and retention of allocation documents.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies by vendor Varies by vendor Varies by vendor Varies by vendor
Bulk Send Yes Yes Yes Yes Varies
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Required Information and Key Fields at a Glance

Taxpayer Name: Full legal name
TIN: SSN or ITIN
Residency Status: Resident or part‑year
Income Breakdown: USVI vs U.S. source
Tax Year: Reporting period
Signatures: Taxpayer and preparer

Penalties and Risks from Incorrect Allocation

Late Filing: Penalties and interest may apply
Incorrect Allocation: May trigger audits and adjustments
Missing TIN: Backup withholding or rejection
Failure to File: Civil penalties and enforcement actions
Intentional Misreporting: Higher fines and potential criminal exposure
Insufficient Documentation: Denial of credits or relief

Common Preparation Mistakes to Avoid

  • Using inconsistent names or TINs across documents, which delays processing and can trigger backup withholding.
  • Failing to record exact residency dates, causing incorrect apportionment between U.S. and USVI tax obligations.
  • Omitting supporting schedules for apportioned income categories such as rental or business income, which invites review.
  • Relying on handwritten totals without attached source documents, increasing the chance of adjustments during audits.

Practical Examples: How Organizations Use Digital Forms for Tax Workflows

Real organizations use digital signing and document workflows to collect allocation statements and supporting documents securely and quickly.

Martin Properties — Tim Martin

A small real estate firm needed remote execution of tenant and payroll allocation documents.

  • Reduced in-person processing and paper handling.
  • "I can process and execute all of these documents online with 100% compliance and built-in security. Whether on mobile or working offline, I can get forms back to their necessary parties efficiently."

Optica Ventures — Brian Fitzgibbons

A services firm centralized signature collection for cross-jurisdiction tax forms.

  • Centralized archive and signer audit trails.
  • "The interface is simple and easy-to-use for our team; more importantly, it is just as easy for our customers."

Key Filing Dates to Watch for Allocation and Related Forms

Observe federal and information return deadlines; territorial filing deadlines typically align with federal calendar dates.

W-9 / TIN Request:

Provide upon payer request; no fixed submission date

Form 1099-NEC:

Issue to recipients and file by January 31

Form 1040 / Individual:

Standard due date is April 15 (extensions available)

1099-MISC Paper Filing:

Paper filing to IRS typically due by late February

1099-MISC Electronic:

Electronic filing to IRS typically due by March 31

Processing Milestones for an Allocation Submission

Track these stages from preparation through filing and record retention to ensure timely compliance.

01

Prepare Allocation Package

Assemble income breakdowns, residency proof, and attachments

02

Obtain Signatures

Collect taxpayer and preparer signatures electronically or on paper

03

File with Authorities

Submit to USVI Bureau or IRS as required

04

Retain Records

Store signed forms and supporting documents per retention policy

Practical Tips for Accurate and Efficient Completion

Adopt consistent practices to reduce errors and speed review cycles for allocation statements.

Verify TINs and Names
Confirm SSNs/ITINs and legal names against ID or payer records before filing to prevent backup withholding or rejects.
Document Residency
Retain travel logs, lease records, or employment contracts to support residency dates used in allocation.
Attach Source Schedules
Include line-item schedules for apportioned income categories so reviewers can validate totals without follow-up.
Use Secure eSign
Enable audit trails, authentication, and encrypted storage to protect sensitive taxpayer data and demonstrate chain of custody.

Frequently Asked Questions About Allocation to the U.S. Virgin Islands

Answers to common questions about who signs, where to file, eSignature acceptability, and correcting submitted allocations.


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