If you are a bona fide resident of the U.S. Virgin Islands (USVI), you generally file your income tax return with the Virgin Islands Bureau of Internal Revenue (BIR), not the IRS, and report your worldwide income to the USVI. If you properly report and pay your taxes to the USVI, you usually do not need to file a U.S. federal income tax return (Form 1040).

A bona fide resident is someone who meets the IRS residency requirements, such as where they live, where their tax home is located, and the strength of their connection to the territory. Rules may be different for couples who file Married filing jointly, so be sure to consult an experienced tax professional if you have questions. For more information, see IRS Publication 570, Tax Guide for Individuals With Income from U.S. Territories.

One key exception is that self-employment tax follows different rules. If you have self-employment income, you may still need to file Form 1040-SS, U.S. Self-Employment Tax Return, with the IRS.

Some bona fide USVI residents may receive IRS notices because IRS systems use wage and income information, prior filing history, and account data to identify taxpayers who may not have filed a required return. These notices may include CP 59, CP 515, CP 516, or CP 518.

A notice does not always mean you owe U.S. income tax, but it does mean you should take action.

Important: Do not ignore an IRS notice. Even if you believe the notice was sent in error, you should respond by the deadline listed on the notice.

What Taxpayers Should Do

1. Read The Notice Carefully

Check the notice for:

• The tax year involved;
• The form the IRS says is missing;
• The response deadline; and
• Where to send your reply.

2. Confirm Where You Were Required to File

Review whether you were a bona fide USVI resident for the tax year. Keep records showing where you lived, worked, and filed your tax return.

Helpful documents may include:

• A copy of your USVI tax return;
• Proof you filed with the USVI BIR;
• Wage or income statements;
• Travel, housing, or employment records; and
• Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Territory, if applicable.

3. Check For Self-Employment Income

If you had business, gig work, or independent contractor income, you may need to file Form 1040-SS with the IRS, even if you do not need to file Form 1040 with the IRS.

4. Respond By the Deadline

Send a written response to the IRS explaining your filing position. Include copies of supporting documents. Do not send originals.

Your response should explain:

• Whether you were a bona fide USVI resident;
• Whether you filed with the USVI BIR;
• Whether you reported worldwide income to the USVI; and
• Whether you had self-employment income.

Important Deadlines or Risks

Respond by the date listed on the IRS notice. If you do not respond, the IRS may send more notices or take further compliance action. If you were required to file Form 1040-SS and did not file, you may owe self-employment tax, penalties, and interest. Missing deadlines can also delay refunds or make the issue harder to resolve.

Do not send a copy of your USVI tax return to the IRS. Instead, it is advisable to provide a certificate issued by USVI BIR showing you filed your tax return with USVI. This practice is to avoid duplicate return filings and double taxation.

Need Help?

If you have tried to resolve the issue with the IRS and still need help, or if the issue is causing financial hardship, the Taxpayer Advocate Service (TAS) may be able to assist you. TAS is an independent organization within the IRS that helps taxpayers resolve problems and protects taxpayer rights.

Available Resources

• IRS Individuals Living or Working in a U.S. Territory page;
• Virgin Islands Bureau of Internal Revenue.