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a_dugas6
(@a_dugas6)
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April 23, 2014 12:46 am  

I am trying to understand the tax structure for when I move. All I can find is that at the end of the year I file a form with the US Gov IRS to basically tell them to send what was given to them from my employer on my behalf and send that to the VI government.

I currently live in Maryland, here I pay federal, then state income taxes, then, just for good measure, county/local income tax.

On the USVI.net website it says:
There are no local income taxes or surcharges imposed on individuals over and above the mirror system rates so that the overall rate of income tax for individuals is equivalent to the rate that a resident of a state without a state income tax would pay

Is this true?

I keep hearing about the cost of living there, and from what I am seeing the cost of most things are equivalent if not better than in Maryland, I live technically in the metro area for both Baltimore and DC, so everything is higher. Average rent for modest single family home here: 2,000 a month, average electricity bill (not counting the necessary air conditioning during May, June, July, and August) is about 200 a month. Gas heat in the winter, add another 300 to 400. Now, I'm realizing that the 300+ I loose each paycheck to state taxes I won't be loosing anymore.


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ChrisMI
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April 23, 2014 1:51 am  

The IRS wont be sending anything to the VI. Until you are a bona fide resident here in the VI, your income earned in the US and your home state is payable to the IRs and your home state, and the income earned in the VI is payable to the BIR here. Once you are a bona fide resident of the VI your income is payable to the BIR here in the VI (same tax forms and tables).

In the states you electronically file your forms. In the VI you hand two copies to some nice people behind a folding table, who stamp them 😉

I waited in line for a whopping 60 seconds, the afternoon of April 15th, so despite it's old fashioned-ness they're pretty good at it (filing). Don't expect a refund from the BIR in less than about 2 years. If you are 'getting money back' have it applied to next year instead and reduce your withholding.

To the board: I am newer here so if I have misspoken please correct me if I erred. Thx.


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Jim Dandy
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April 23, 2014 12:51 pm  

Before you begin paying your taxes in the USVI you must notify the IRS that you have elected to have your entire worldwide income taxed in the USVI. I believe it is IRS form is 8868. Generally you need to be in residence at least 183 days annually for the IRS to accept this election.

If you have self employment taxes due, YOU DO NOT INCLUDE THEM OR PAY THEM TO THE USVI. You must instead file a Form 1040 SS and pay the taxes, including quarterly estimates directly to the IRS.

If you have a split year where you consider yourself a part year resident I would wait until you are a full year resident with no state or Federal taxes withheld or due in the mainland USA.

As mentioned never overpay in the USVI as getting a refund can take years.

Finally if you ever have a problem with your taxes in the USVI getting it resolved is almost possible. Many of the administrative procedures and collection safe guards that exist in the IRS Guidelines are not available in the USVI. Instead you will be stuck dealing with a semi literate collection employee of the IRB.


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Linda J
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April 23, 2014 1:44 pm  

Jim, unfair reference to the employees at irb. I always found them willing, but the system is so fouled up! And, even if you are owed a refund, if the money isn't available there is little the front line employee can do. My son is still owed a refund from 2009. I dogged them until I left island in 2011 to no avail. Now that no one is there to push its probably lost money.


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C_Ray6
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April 23, 2014 1:47 pm  

How does pension income relate to all of this?


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CruzanIron
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April 23, 2014 1:54 pm  

You can't beat the interst rate the VIIRB pays on refunds. If you are a saver, it's a safe investment and they don't send out 1099's (last year) so the interest is tax free.

Taxpayers who do not receive their refund within 45 days of filing accrue a 4 percent annual interest on their refund. To calculate the interest payments, the Bureau of Internal Revenue takes the refund amount and calculates 4 percent of that total. The 4 percent interest then is divided by 365 days. Each day after June 1 that the check is late - if the return was filed by April 15 - that portion of the interest is added to the refund.


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STXBob
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April 23, 2014 1:59 pm  

How does pension income relate to all of this?

Assuming you're a bona fide resident of the USVI, then whatever taxes would have been owed on pension income to the IRS, would instead be filed and paid to the IRB. But any applicable self-employment tax (if you're semi-retired) continues to get paid to the IRS.


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a_dugas6
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April 23, 2014 2:40 pm  

I will be a bon fide resident, and satisfy the time requirement beginning January of next year. At that time I will be working for my same employer, who is in Pennsylvania. They will be taking the federal taxes out.

What I am still unclear about is: Is it accurate for me to tell them, at that time (January 2015), to stop taking state (and local/county) income taxes out of my pay check, because in STX I only pay "federal" taxes?

In January 2015 I will be filing a federal and state tax return for the tax year of 2014, because I will be a resident of Maryland until October or November of this year, 2014.

I'm just trying to figure out what the deduction my employer will need to be taking out beginning in Jan 2015 when my official residence will by St. Croix USVI.

Thank you


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Alana33
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April 23, 2014 6:32 pm  

Consult a CPA.


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STXBob
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April 23, 2014 6:42 pm  

a_dugas6: I think you are correct, that you should ask your Pennsylvania employer to stop withholding any non-federal taxes. Whether their payroll system can handle it is another story. Worst case, you can apply later for a refund of those taxes.

I don't think need you need to consult a CPA, but your employer should, if they can't figure it out.

The following general reminder doesn't apply to you, because you're doing it right, but it sometime trips people up: You get taxed based on your source income, which means you get taxed in the jurisdiction where you physically perform the work, not where the employer or client is based and sends you the money from.


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speee1dy
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April 23, 2014 7:22 pm  

ISNT HE STILL technically an employee of pa? and therefore would still be subject to their withholding ? Would that also mean he would still pay to the us?


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Jim Dandy
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April 23, 2014 9:27 pm  

Jim, unfair reference to the employees at irb. I always found them willing, but the system is so fouled up! And, even if you are owed a refund, if the money isn't available there is little the front line employee can do. My son is still owed a refund from 2009. I dogged them until I left island in 2011 to no avail. Now that no one is there to push its probably lost money.

Everyone to their own opinion.

I have been trying to resolve a complex issue related to my 2006 taxes. After three years of getting no where I hired a local attorney that said she specialized in IRB issues. She got no where could not even get them to hold the administrative hearing that every tax payer is entitled to under IRS procedures.

I finally got fed up with the problem and revoked my election to be taxed in the USVI and established my tax residence in Florida.

I have neighbors that have had similar issues and their solution was to deal with the IRS and forget paying taxes to the USVI. It is a simple process for most retirees that have no W-2 income in the USVI subject to withholding to relocate their taxable residence.


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STXBob
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April 23, 2014 9:46 pm  

ISNT HE STILL technically an employee of pa? and therefore would still be subject to their withholding ?

I don't think he would be subject to state and local withholding. See this: http://www.irs.gov/publications/p570/ch02.html

"Item of Income: Salaries, wages, and other compensation for labor or personal services
Factor Determining Source: Where labor or services performed"

Would that also mean he would still pay to the us?

He would still pay federal FICA taxes, just not federal income taxes.


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STXBob
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April 23, 2014 9:53 pm  

How does pension income relate to all of this?

Assuming you're a bona fide resident of the USVI, then whatever taxes would have been owed on pension income to the IRS, would instead be filed and paid to the IRB. But any applicable self-employment tax (if you're semi-retired) continues to get paid to the IRS.

Correction, based on this: http://www.irs.gov/publications/p570/ch02.html
Pension contributions are sourced where services were performed that earned the pension.
Pension investment earnings are sourced where pension trust is located.

"Example: You are a U.S. citizen who worked in Puerto Rico for a U.S. company. All services were performed in Puerto Rico. Upon retirement you remained in Puerto Rico and began receiving your pension from the U.S. pension trust of your employer. Distributions from the U.S. pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U.S. source income."

So it appears that if you worked in the states with a pension trust in the states, and you then retire in the USVI, you would pay taxes on pension income to the IRS, not to the IRB.


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a_dugas6
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April 23, 2014 11:07 pm  

STXBob - Thank you.

speee1dy - Currently, because I live and work in Maryland, I work form home, my employer takes out taxes for the state of Maryland, NOT the state of PA where they are located. So I think I'm good.

Thank you everyone for your replies.


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Jim Dandy
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April 24, 2014 12:16 am  

Consult a CPA.

Only use a CPA in the USVI. Most stateside CPAs aren't aware of the nuisances of filing in the USVI and the issues/ procedures are not well documented if documented at all in the IRS procedures. My return was prepared by a US CPA and I got jammed up.

My step son filed using another US CPA and he has been waiting for three years for a refund do to a misunderstanding about self employment taxes.


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speee1dy
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April 24, 2014 12:06 pm  

thanks for the clarifications. i learned something new today 🙂


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STXBob
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April 24, 2014 12:40 pm  

a_dugas6: After further thought on your Pennsylvania/USVI situation, your Pennsylvania employer should probably do whatever withholdings a USVI employer would do, which is to the IRS (for FICA) and to the IRB (for USVI income tax, USVI unemployment insurance, etc.). I don't know what USVI withholdings look like, since I'm self-employed.


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C_Ray6
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April 25, 2014 2:03 am  

Thank you StxBob!


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Maria123
(@Maria123)
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Joined: 8 years ago
Posts: 16
May 2, 2014 6:13 pm  

Here in NYC, my coworkers who live in NJ, pay the NY state and local taxes on their paychecks. Since NJ taxes are less than NY, they usually will get a refund. I think this rule is the same for PA.


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doc
 doc
(@doc)
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May 2, 2014 9:46 pm  

agree with alana33 and others. GET A CPA!!!


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Alana33
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May 2, 2014 11:09 pm  

Everything is "different" in the VI as is everyone's particular situation so when in doubt, don't ask us.......get professional advice.


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gonetropo
(@gonetropo)
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Posts: 427
May 3, 2014 10:16 am  

JIm Dandy, I am in agreement with you on the employees. 61 phone calls, 3 registered letters that were all lost after they signed for them, 2 meetings with Claudette Watson-Anderson and 2 years to get one error resolved that THEY caused. They are totally incompetent at the IRB and I told Ms. Watson-Anderson that she needed to fire all of them for incompetence.

Before you begin paying your taxes in the USVI you must notify the IRS that you have elected to have your entire worldwide income taxed in the USVI. I believe it is IRS form is 8868. Generally you need to be in residence at least 183 days annually for the IRS to accept this election.

If you have self employment taxes due, YOU DO NOT INCLUDE THEM OR PAY THEM TO THE USVI. You must instead file a Form 1040 SS and pay the taxes, including quarterly estimates directly to the IRS.

If you have a split year where you consider yourself a part year resident I would wait until you are a full year resident with no state or Federal taxes withheld or due in the mainland USA.

As mentioned never overpay in the USVI as getting a refund can take years.

Finally if you ever have a problem with your taxes in the USVI getting it resolved is almost possible. Many of the administrative procedures and collection safe guards that exist in the IRS Guidelines are not available in the USVI. Instead you will be stuck dealing with a semi literate collection employee of the IRB.


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a_dugas6
(@a_dugas6)
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Joined: 7 years ago
Posts: 26
May 5, 2014 1:43 pm  

Here in NYC, my coworkers who live in NJ, pay the NY state and local taxes on their paychecks. Since NJ taxes are less than NY, they usually will get a refund. I think this rule is the same for PA.

I think the difference is that I do NOT work in PA. My company employees people from all over the states, and we all pay the income tax based on where we live, because that is where we are earning the income. I have been working for this company for years, I have never paid PA taxes, and have never had an issue.

To everyone that suggested getting a CPA, when it comes times to file my taxes, I will probably get a CPA. However my question was regarding withholdings.

Thank you


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Alana33
(@Alana33)
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May 5, 2014 2:10 pm  

Cal VIBIR and ask them directly.


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