Guam residents generally do not pay federal income taxes to the IRS. Under the Organic Act of Guam, U.S. income tax laws apply on the island, but the tax is paid to Guam’s Department of Revenue and Taxation and stays in Guam’s treasury.1Office of the Law Revision Counsel. 48 USC 1421i So the short answer to whether Guam pays federal taxes is: not income tax, but yes to Social Security and Medicare payroll taxes, and yes to self-employment tax. Whether you personally file with Guam or the IRS depends on whether you qualify as a bona fide resident of Guam, and a few situations pull people back into the federal system regardless.
Why Income Tax Stays in Guam
Guam operates under a “mirror code.” Section 31 of the Organic Act, at 48 U.S.C. § 1421i, provides that U.S. income tax laws “shall be held to be likewise in force in Guam,” with local terms substituted for federal ones.1Office of the Law Revision Counsel. 48 USC 1421i The rates and rules track the Internal Revenue Code, but the tax collected is called the Guam Territorial income tax and is payable to the Government of Guam. Guam publishes its own version of Form 1040, filed with the territorial tax department rather than the IRS.2GovGuamDocs. Forms from the Guam Department of Revenue and Taxation
Who Qualifies as a Bona Fide Resident of Guam
Where you file turns on this one classification. Under 26 U.S.C. § 937, you are a bona fide resident of Guam for a tax year if both of the following are true:3Office of the Law Revision Counsel. 26 USC 937 – Residence and Source Rules Involving Possessions
- You were present in Guam for at least 183 days during the year.
- Your tax home was in Guam for the entire year, and you had no closer connection to the United States or a foreign country than to Guam.
The regulations offer alternatives to the 183-day test, including presence in Guam for at least 549 days over a rolling three-year period with at least 60 days in each of those years, or spending no more than 90 days in the United States during the tax year.4eCFR. 26 CFR 1.937-1 – Bona Fide Residency in a Possession Any one of these, paired with the tax home and closer connection requirement, is enough.
If You Are a Bona Fide Resident of Guam
You file one return, with Guam, and it covers your worldwide income. You generally do not file a U.S. Form 1040 and do not pay federal income tax.5Internal Revenue Service. Publication 570 – Tax Guide for Individuals With Income From U.S. Possessions When you tally payments on the Guam return, you count income tax withheld or paid to either Guam or the United States, overpayment credits from either jurisdiction, and estimated tax payments made to either one.
One trap: certain federal credits are off-limits to bona fide Guam residents on a federal return. You cannot claim the Earned Income Credit or the Additional Child Tax Credit on a U.S. Form 1040. Check whether Guam’s Department of Revenue and Taxation offers an equivalent on the territorial return.6Internal Revenue Service. Bona Fide Residents of Guam – Tax Credits
If You Have Guam Income but Are Not a Bona Fide Resident
If you are a U.S. citizen or resident alien with Guam-source income but you don’t meet the bona fide residence test, you file with the IRS. You report worldwide income, including your Guam earnings, on a standard Form 1040 and do not file a separate Guam return for that year.5Internal Revenue Service. Publication 570 – Tax Guide for Individuals With Income From U.S. Possessions
An extra form comes in at higher incomes. If your adjusted gross income is $50,000 or more and your gross income from Guam sources is $5,000 or more, attach Form 5074 to your U.S. return. The IRS and Guam use it to divide the tax between the two jurisdictions.5Internal Revenue Service. Publication 570 – Tax Guide for Individuals With Income From U.S. Possessions
Self-Employment Tax Still Goes to the IRS
Bona fide Guam residents who owe no federal income tax may still owe the IRS. If you have net self-employment earnings of $400 or more and are not otherwise required to file a U.S. income tax return, you report and pay self-employment tax on Form 1040-SS.7Internal Revenue Service. Instructions for Form 1040-SS This tax funds Social Security and Medicare and goes to the federal government. It applies to self-employed residents of Guam the same way it applies to residents of American Samoa, the U.S. Virgin Islands, the Northern Mariana Islands, and Puerto Rico.8Internal Revenue Service. Individuals Living or Working in a U.S. Territory
FICA Payroll Taxes Apply in Guam
Social Security and Medicare payroll taxes work in Guam the same way they work stateside. Employers in Guam must withhold and deposit FICA under the same rules as mainland employers, and those deposits go by electronic funds transfer to the federal system.9Internal Revenue Service. Persons Employed in a U.S. Possession – FICA Income tax withholding, by contrast, goes to Guam’s Department of Revenue and Taxation. A Guam employer runs two separate deposit streams: FICA to the IRS, income tax withholding to Guam. FICA obligations are reported on Form 941-SS rather than the mainland Form 941.
Some workers are exempt from FICA in the territories, including foreign agricultural workers on H-2A visas, students employed by their school, and nonresident aliens in certain visa categories such as F-1 and J-1.9Internal Revenue Service. Persons Employed in a U.S. Possession – FICA
Military and Federal Civilian Employees Stationed in Guam
Active-duty service members stationed in Guam who keep a legal domicile in a U.S. state are protected by the Servicemembers Civil Relief Act. They continue to file with the IRS and their home state rather than with Guam, because military orders don’t shift legal domicile. The federal income tax withheld from their pay is later transferred from the U.S. Treasury to Guam’s treasury under 26 U.S.C. § 7654(d).10Office of the Law Revision Counsel. 26 USC 7654 – Coordination of United States and Certain Possession Individual Income Taxes The same transfer rule covers civilian federal employees working in Guam.
Form 8898 When You Move To or From Guam
If you begin or end bona fide residence in Guam and your worldwide income for the year is more than $75,000, you must file Form 8898.11Internal Revenue Service. Moving to or From a United States (U.S.) Territory/Possession For married taxpayers, the $75,000 threshold applies to each spouse separately. The form is due by the filing deadline for your Form 1040, including extensions, and it’s filed on its own rather than attached to the return.8Internal Revenue Service. Individuals Living or Working in a U.S. Territory
Missing Form 8898 when it’s required carries a $1,000 penalty, and the same penalty can apply if you omit required information or supply incorrect details. It’s waived only for reasonable cause, not willful neglect, and it sits on top of any potential criminal penalties.12Internal Revenue Service. Instructions for Form 8898 Anyone planning a move to or from the island should add it to the checklist early.