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Illustrated Example 
of Form 8689(p22)


Illustrated Example of Form 8689

Juan and Carla Moreno live and work in the United States. In 2009, they received $14,400 in income from the rental of a condominium they own in the U.S. Virgin Islands (USVI). The rental income was deposited in a bank in the USVI and they received $500 of interest on this income. They were not bona fide residents of the USVI during the entire tax year.
The Morenos complete Form 1040 (not illustrated), reporting their income from all sources, including their interest income and the income and expenses from their USVI rental property (reported on Schedule E (Form 1040)). The Morenos take the standard deduction for married filing jointly, both are under 65, and they have no dependents.
The Morenos also complete Form 8689 to determine how much of their U.S. tax shown on Form 1040, line 60 (with certain adjustments), must be paid to the U.S. Virgin Islands.
The Morenos file their Form 1040, attaching Form 8689 and all other schedules, with the Internal Revenue Service.
At the same time, they send a copy of their Form 1040 with all attachments, including Form 8689, to the Virgin Islands Bureau of Internal Revenue. This copy will be processed as their original Virgin Islands return.

Completing Form 8689.(p22)


Juan and Carla enter their names and Juan's social security number at the top of the form.

Part I.(p22)

The Morenos enter their income from the USVI in Part I (see page 25). The interest income is entered on line 2 and the net rental income of $6,200 ($14,400 of rental income minus $8,200 of rental expenses) is entered on line 11. The Morenos' total USVI income of $6,700 is entered on line 16.

Part II.(p22)

The Morenos have no adjustments to their USVI income, so they enter zero (-0-) on line 28, and $6,700 on line 29. Their USVI adjusted gross income (AGI) is $6,700.

Part III.(p22)

On line 30, the Morenos enter the amount from Form 1040, line 60 ($4,751). They leave line 31 blank and put this same amount on line 32.
The Morenos enter their worldwide AGI, $54,901 (Form 1040, line 38), on line 33. Next, they find what percentage of their AGI is from USVI sources ($6,700 ÷ $54,901 = 0.122) and enter that as a decimal on line 34. They then apply that percentage to the U.S. tax entered on line 32 to find the amount of U.S. tax allocated to USVI income ($4,599 x 0.122 = $561), and enter that amount on line 35.

Part IV.(p22)

Part IV is used to show payments of income tax to the USVI only. The Morenos had no tax withheld by the U.S. Virgin Islands, but made estimated tax payments to the USVI of $400, which they entered on lines 37 and 39. They include this amount ($400) in the total payments on Form 1040, line 71. On the dotted line next to the entry space for line 71, they enter "Form 8689" and show the amount. The Morenos do not complete Form 1116 because they receive credit on Form 1040, line 71, for the tax paid to the USVI. The income tax they owe to the USVI ($161) is shown on Form 8689, line 44. They also include this additional amount ($161) in the total on Form 1040, line 71. The Morenos must pay their USVI tax at the same time they file the copy of their return with the U.S. Virgin Islands.
Form 4563, page 1 for John Black Text DescriptionForm 4563, page 1 for John Black  
Form 5074, for Tracy Grey Text DescriptionForm 5074, for Tracy Grey  
Form 8689, page 1 for Juan and Carla Moreno Text DescriptionForm 8689, page 1 for Juan and Carla Moreno  

How To Get Tax Help(p26)


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You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate.(p26)


The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. Here are seven things every taxpayer should know about TAS:
  • TAS is your voice at the IRS.
  • Our service is free, confidential, and tailored to meet your needs.
  • You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should.
  • TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. This includes businesses as well as individuals.
  • TAS employees know the IRS and how to navigate it. We will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.
  • TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. You can call your local advocate, whose number is in your phone book, in Pub. 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059.
  • You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at

Low Income Taxpayer Clinics (LITCs).(p26)

The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. LITCs are independent from the IRS. Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. For more information, see Publication 4134, Low Income Taxpayer Clinic List. This publication is available at, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office.

Free tax services.(p26)


To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. It contains lists of free tax information sources, including publications, services, and free tax education and assistance programs. It also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on your telephone.
Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities.

Free help with your return.(p26)


Free help in preparing your return is available nationwide from IRS-trained volunteers. The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Many VITA sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. To find the nearest VITA or TCE site, call 1-800-829-1040.
As part of the TCE program, AARP offers the Tax-Aide counseling program. To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at
For more information on these programs, go to and enter keyword "VITA" in the upper right-hand corner.
Internet. You can access the IRS website at 24 hours a day, 7 days a week to:
  • E-file your return. Find out about commercial tax preparation and e-file services available free to eligible taxpayers.
  • Check the status of your 2009 refund. Go to and click on Where's My Refund. Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund.
  • Download forms, instructions, and publications.
  • Order IRS products online.
  • Research your tax questions online.
  • Search publications online by topic or keyword.
  • Use the online Internal Revenue Code, Regulations, or other official guidance.
  • View Internal Revenue Bulletins (IRBs) published in the last few years.
  • Figure your withholding allowances using the withholding calculator online at
  • Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant.
  • Sign up to receive local and national tax news by email.
  • Get information on starting and operating a small business.
Phone. Many services are available by phone.  
  • Ordering forms, instructions, and publications. Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days.
  • Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
  • Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to or look in the phone book under United States Government, Internal Revenue Service.
  • TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.
  • TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.
  • Refund information. To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Refunds are sent out weekly on Fridays. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back.
  • Other refund information. To check the status of a prior year refund or amended return refund, call 1-800-829-1954.
Evaluating the quality of our telephone services. To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to listen in on or record random telephone calls. Another is to ask some callers to complete a short survey at the end of the call.
Walk In
Walk-in. Many products and services are available on a walk-in basis. 
  • Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
  • Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary—just walk in. If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. All other issues will be handled without an appointment. To find the number of your local office, go to or look in the phone book under United States Government, Internal Revenue Service.
Due date
Mail. You can send your order for forms, instructions, and publications to the address below. You should receive a response within 10 days after your request is received.

Internal Revenue Service 
1201 N. Mitsubishi Motorway 
Bloomington, IL 61705-6613

DVD for tax products. You can order Publication 1796, IRS Tax Products DVD, and obtain:
  • Current-year forms, instructions, and publications.
  • Prior-year forms, instructions, and publications.
  • Tax Map: an electronic research tool and finding aid.
  • Tax law frequently asked questions.
  • Tax Topics from the IRS telephone response system.
  • Internal Revenue Code—Title 26 of the U.S. Code.
  • Fill-in, print, and save features for most tax forms.
  • Internal Revenue Bulletins.
  • Toll-free and email technical support.
  • Two releases during the year. 
    – The first release will ship the beginning of January 2010. 
    – The final release will ship the beginning of March 2010.
Purchase the DVD from National Technical Information Service (NTIS) at for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee).