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USVI Income taxes

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gray_penguin
(@gray_penguin)
New Member

Good day,

I have been trying to figure out if there is an income tax advantage to living in the USVI or not. I see information that says the rates are exactly the same as living in the states and I also find information that says the rates are more like 3.5% of gross income. Would someone please give me some valid information on this. I would be counting on most of my income coming from USVI based sources, but might have some IT type consulting income that would be from companies on the US mainland.

Also, I understand the requirements to be a bone fide resident to be this, at least 184 days residing in USVI and no more then 90 days on the mainland, is this correct?

Thanks and good day!

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Topic starter Posted : January 21, 2009 5:01 pm
GoodToGo
(@GoodToGo)
Trusted Member

On a related topic - can I use the same TaxCut/Turbo Tax type software I used on the mainland to do and file taxes in USVI?

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Posted : January 21, 2009 5:41 pm
Trade
(@Trade)
Expert

The tax forms are all the same ones as used in the States. The taxes paid here stay here. Depending on your situation & if you earn income on the mainland you may have those taxes in the States. A good friend uses TurboTax here. I don't know about the 184 days residing here.

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Posted : January 21, 2009 8:28 pm
Alexandra
(@Alexandra)
Trusted Member

Where you pay your taxes depends both on residency and where your income is earned. If you are self-employed, you will pay an additional gross receipts tax to the USVI's BIR and pay your self-employment tax to the IRS on the mainland... and possibly some overage tax to the USVI depending on your tax bracket and deductions, etc. It can be complicated if you are self-employed. If you are a W-2 employee taxes are much simpler to figure out.

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Posted : January 21, 2009 8:32 pm
Edward
(@Edward)
Trusted Member

How about retirement income. I understand it is not taxed in Florida. Is it taxed in VI?

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Posted : January 22, 2009 3:24 am
Trade
(@Trade)
Expert

It's taxed the same way as it would be in the States.

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Posted : January 22, 2009 9:35 am
stt007
(@stt007)
Advanced Member

As I understand it, Florida has no state income tax and neither do the VI's.

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Posted : January 22, 2009 9:53 am
East Ender
(@east-ender)
Expert

You should probably talk to a tax professional instead of us bozos about this...BUT... I think the 184 day rule has to do with tax breaks under the EDC program. The VI seems to be happy for you to pay your taxes here as long as you claim it as your residence.

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Posted : January 22, 2009 11:25 am
billd
(@billd)
Trusted Member

I have done it both ways. You pay the same US Federal rate regardless of where you are. So there is no difference there. Depending on the state you live in you will need to pay a state and perhaps a city tax. I would suggest that you fill out the turbo tax BOTH ways. In the state you are in and then just the federal. Watch out as there are states with tax rebates if you are older nor live in the state. NJ has a real estate rebate.

I am retired and get a pension which is not taxes by the state as well as SS.

Good luck.

Billd

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Posted : January 23, 2009 11:48 am
AllMashUp
(@AllMashUp)
Advanced Member

I was wondering about the 1090 INTs that my online banks supposedly report to the IRS, if I'm filling down here are those records mailed to the IRB? Otherwise they wouldn't know about interest income unless you report it.

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Posted : January 23, 2009 12:32 pm
gray_penguin
(@gray_penguin)
New Member

Thanks for the replies,

So, in my case, moving to USVI will save us from State taxes and sales taxes. Which although a good percentage of my costs here, would not cover the 33% increase in cost of living (if I am to believe that number I have seen published). We would be able to downsize our living space required by half which should be enough to keep the Rent/Mortgage the same for us.

The reason we are looking into moving is because we REALLY don't want to pay for all the Billions/Trillions the US Gov is dumping into the Banks and car companies. At least if we were there, the money we pay in income taxes would go to a better cause then paying bad execs for doing a crappy job.

Thanks to all for sharing and making this a very informative board!

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Topic starter Posted : January 23, 2009 3:09 pm
Betty
(@Betty)
Trusted Member

33% increase depends where you are coming from. Coming from southern california, which has a high cost of living, I found even losing sales and state tax that it is much more expensive here. Well....the cost of housing was a little cheaper, but not by much.

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Posted : January 23, 2009 3:26 pm
AllMashUp
(@AllMashUp)
Advanced Member

At least if we were there, the money we pay in income taxes would go to a better cause then paying bad execs for doing a crappy job.

I wouldn't be too excited about paying income tax here either.....it may not go into a national bail-out but it certainly would be funding an oversized government that struggles to provide even some basic services.

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Posted : January 23, 2009 6:31 pm
East Ender
(@east-ender)
Expert

Gray: While there isn't a direct sales tax, there is a gross receipts tax. This is placed on goods when they come in from the wholesaler and again when they are sold by the retailer. It is really a hidden tax, as you don't see it except for the higher prices of goods. And here, while the tax money stays in the territory, you will be amazed at some of the stuff you will get to chip in for...

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Posted : January 23, 2009 8:06 pm
Jim Dandy
(@jim_dandy)
Trusted Member

Just remember if you are self employed in the VI you need to file a form 1040-SS and send your Social Security taxes stateside instead of including them with your 1040 to the VI.

I learned this the hard way when the IRS came after me for this money plus penalties and interest. You also required to make quarterly estimated payments against your 1040 -SS. The VI IRB never notified me that I had sent them money that should have gone stateside.

There is also a form you are required to file with the IRS notifying them that you are leaving their jurisdiction and electing to be taxed in an US Territory. This requirement went into effect in 2006.

Jim

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Posted : January 24, 2009 2:17 am
SunshineCruzan
(@SunshineCruzan)
Advanced Member

At least if we were there, the money we pay in income taxes would go to a better cause then paying bad execs for doing a crappy job.

I wouldn't be too excited about paying income tax here either.....it may not go into a national bail-out but it certainly would be funding an oversized government that struggles to provide even some basic services.

Like those nice SUV's?

(sorry...just had to!)

But seriously, great topic here for tax-idiots like me. I think I'm learning stuff I never would have thought about before. THANKS! 🙂

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Posted : January 24, 2009 2:50 am
Betty
(@Betty)
Trusted Member

SS & Medicare get paid to the feds, Withholding & everything else gets paid to the virib. Remember everything you have to pay the virib, make a copy and get it stamped. Keep everything handy in a binder or a file, because they ALWAYS go fishing for money and you have to prove yourself.

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Posted : January 24, 2009 7:45 pm
DUN
 DUN
(@DUN)
Trusted Member

SS & Medicare get paid to the feds, Withholding & everything else gets paid to the virib. Remember everything you have to pay the virib, make a copy and get it stamped. Keep everything handy in a binder or a file, because they ALWAYS go fishing for money and you have to prove yourself.

Betty is correct, keep copies of everything from all local government offices!
Remember, the property tax assessor tried the same get rich trick (I remember calculating the cost of postage to send out all those notices was over $40,000 not to mention the paper, ink & salaries).
And speaking of the Irb fishing, they thief I stimulus check Dem!(they added penalties to add up to the whole check to the penny, how convenient!)
I hear Obama will be sending them a bunch more checks to steal from taxpayers!
Yup, keep records!

OMG, I just figured out what some local workers are GOOD at!

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Posted : January 25, 2009 1:37 pm
Alexandra
(@Alexandra)
Trusted Member

Just remember if you are self employed in the VI you need to file a form 1040-SS and send your Social Security taxes stateside instead of including them with your 1040 to the VI.

I learned this the hard way when the IRS came after me for this money plus penalties and interest. You also required to make quarterly estimated payments against your 1040 -SS. The VI IRB never notified me that I had sent them money that should have gone stateside.

There is also a form you are required to file with the IRS notifying them that you are leaving their jurisdiction and electing to be taxed in an US Territory. This requirement went into effect in 2006.

Jim

I had this same problem with the BIR & IRS regarding the self employment tax. The BIR told me to file my tax return with them and I did so regularly from when I first moved here. Three years later they said Oops, the tax should have been paid to the IRS. Nearly 2 years after that they finally refunded part of what I had paid them... but meanwhile the IRS wanted the entire tax paid along with penalties and interest for all those years... even though it had been paid in full in good faith to the BIR. They're still working out the mess and they don't give the tax payer any breaks for the BIR's screw-up. All new arrivals who are self-employed... or people who have been here a while and switch to self-employed status.... need to be aware of this or it can become quite a nightmare. The gross receipts tax is also charged directly to most self-employed people so that the BIR gets their cut of your income since you otherwise pay most of your tax to the IRS.

The gross receipts tax for 2008 is due by the end of January, by the way, not April 15th.

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Posted : January 25, 2009 4:02 pm
gray_penguin
(@gray_penguin)
New Member

The gross receipts tax is also charged directly to most self-employed people so that the BIR gets their cut of your income since you otherwise pay most of your tax to the IRS.

The gross receipts tax for 2008 is due by the end of January, by the way, not April 15th.

Humm, I am self employed but do not resell anything only provide computer/programming services. Is there some kind of tax on services in the VI's ?

The self employment tax I understand because a self employed person does not have a company paying half their FICA taxes like an employed person.

There is also a form you are required to file with the IRS notifying them that you are leaving their jurisdiction and electing to be taxed in an US Territory. This requirement went into effect in 2006.

Did not read this anywhere, thanks for the heads up!

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Topic starter Posted : February 2, 2009 12:42 am
Ms Information
(@Ms_Information)
Advanced Member

Good day,

I have been trying to figure out if there is an income tax advantage to living in the USVI or not. I see information that says the rates are exactly the same as living in the states and I also find information that says the rates are more like 3.5% of gross income. Would someone please give me some valid information on this. I would be counting on most of my income coming from USVI based sources, but might have some IT type consulting income that would be from companies on the US mainland.

Also, I understand the requirements to be a bone fide resident to be this, at least 184 days residing in USVI and no more then 90 days on the mainland, is this correct?

Thanks and good day!

As you have discovered through these posts, the USVI is not a tax haven. In fact, unless you are leaving a state with a high income tax it will probably end up costing you more. Some corporations have been able to use EDC programs to reduce their taxes, but for the most part that has also been minimized as residency regulations have been enforced. If you do it all legally, you will be paying the same or more as in the states. As Alexandra points out, even our own government makes it harder to do the right thing tax wise.

The BVI, Anguilla and some other Caribbean islands do offer some corporate tax benefits, but very little to the individual tax payer.

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Posted : February 2, 2009 3:57 pm
East Ender
(@east-ender)
Expert

gray:

"Humm, I am self employed but do not resell anything only provide computer/programming services. Is there some kind of tax on services in the VI's ?"

Yes, if you are self-employed and provide a service, your income is subject to gross receipts tax.

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Posted : February 2, 2009 6:32 pm
stt007
(@stt007)
Advanced Member

I thought there was no state income tax in USVIs. Also, what is the form to fill out to IRS stating you are part of USVi tax jurisdiction once you become a resident?

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Posted : February 24, 2009 1:18 pm
AllMashUp
(@AllMashUp)
Advanced Member

I have to send that form in as well...here's the info straight from the horses mouth. The determination of Bona Fide residency is a little cumbersome but explained on irs.gov

"Notifying the IRS about Residency in a U.S. Territory

If a taxpayer moves to or from a territory and has worldwide income of more than $75,000 that year, it is necessary to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, with the Internal Revenue Service (IRS). If married, the $75,000 threshold applies to each spouse separately.

File Form 8898 by the due date (including extensions) for filing the Form 1040 or Form 1040NR. File this form by itself at the following address:

Internal Revenue Service center
P.O. Box 331 Drop Point S-607
Bensalem, PA 19020-8517

There may be a $1,000 penalty for not filing a required Form 8898 or for not providing all of the required information."

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Posted : February 24, 2009 1:32 pm
stt007
(@stt007)
Advanced Member

thanks for the thorough explanation. Good point that I should check on irs.gov. I appreciate the assist.

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Posted : February 24, 2009 2:26 pm
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