Form 8898: Instructions and Filing Requirements

Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Territory, is an informational document filed with the Internal Revenue Service (IRS). Filing this form is required for certain individuals to formally notify the IRS of a change in tax residency status involving a U.S. territory, ensuring they comply with U.S. tax law.

Who Is Required to File Form 8898

A filing requirement for Form 8898 is triggered when an individual changes their residency status concerning a U.S. territory and has a worldwide gross income over $75,000 for the tax year. Worldwide gross income includes all income from any source, in the form of money, property, or services, before any deductions are taken. This threshold is calculated for the individual filer; a spouse’s income is not included. If both spouses meet the criteria, they must each file a separate Form 8898.

The filing obligation applies to two groups. The first includes U.S. citizens or residents who take the tax position that they have become a bona fide resident of a U.S. territory. The second consists of individuals who cease to be bona fide residents of a U.S. territory. For tax purposes, U.S. territories include:

• American Samoa
• Guam
• The Commonwealth of the Northern Mariana Islands (CNMI)
• The Commonwealth of Puerto Rico
• The U.S. Virgin Islands

An individual is considered a bona fide resident of a territory if they meet specific criteria related to their physical presence, tax home, and connections to that location. This involves having a primary place of business or employment in the territory, spending a significant amount of time there, and establishing stronger personal and financial connections to the territory than to the United States or any foreign country.

Information and Documentation Needed to Complete the Form

Before filling out Form 8898, you must gather specific personal and financial information. This includes your full name, Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), your address before the residency change, and your new address.

Part I of the form captures general information, where you enter your name, SSN, and the tax year. You must also check the box indicating whether you became a bona fide resident of a U.S. territory or ceased to be one.

Part II is for individuals who became bona fide residents. You will need to provide the date your residence began and details about your physical presence, the location of your tax home, and your closer connections to the territory. Part III is for those who ceased to be bona fide residents and requires the date your residence ended and information substantiating this change, such as where you established residency after leaving.

The final section, Part IV, requires your signature and the date. By signing, you are declaring under penalties of perjury that the information provided is true, correct, and complete. An unsigned form is not considered a valid filing.

Filing Procedures and Deadlines

The deadline for filing Form 8898 coincides with the due date for your U.S. individual income tax return, which is April 15 for most taxpayers. This deadline includes any extensions you have filed for your income tax return. For example, if you file an extension for your Form 1040 to October 15, the due date for your Form 8898 is also extended to October 15.

Form 8898 is a standalone filing and should not be attached to your Form 1040 or 1040-SR. It can be completed and submitted electronically or mailed to: Internal Revenue Service, 3651 S. IH-35, MS 4301 AUSC, Austin, TX 78741. Submitting the form late, sending it to the wrong address, or including it with your regular tax return can lead to processing delays. Always verify the mailing address in the most current instructions on the IRS website.

Penalties for Non-Compliance

Failing to meet the filing requirements for Form 8898 can result in financial consequences. The IRS imposes a penalty of $1,000 for each instance of non-compliance. This penalty applies not only to a complete failure to file but also to filings that are submitted after the deadline or contain incomplete or inaccurate information.

The penalty may be waived in certain circumstances. If you can demonstrate that the failure to file was due to reasonable cause and not willful neglect, the IRS may abate the penalty. Proving reasonable cause involves showing that you exercised ordinary business care and prudence but were nevertheless unable to file the form on time.