Bona Fide Resident Status for U.S. Territory and Form 8898 Filing Requirements

The $75,000 threshold for Form 8898 exists primarily to reduce paperwork burden on both taxpayers and the IRS. Not everyone needs to be tracked with the same level of scrutiny. Your situation is actually pretty common. Since you're under the threshold, you're correct that you're not required to file Form 8898. The IRS has information sharing agreements with the territorial tax authorities, so there is some visibility between systems even without you filing the form. If you're concerned about potential questions in the future, you could keep good records showing: 1. Your physical presence in the territory (housing leases, utility bills) 2. Your territorial tax returns (proving you're filing somewhere) 3. Documentation of your income being under the Form 8898 threshold While an audit is possible, it's unlikely if you're properly filing with your territorial tax authority. The IRS generally focuses resources on higher-risk situations.

After struggling with similar territory residency questions last year, I found an amazing service that saved me tons of stress. Check out https://taxr.ai - they specialize in analyzing territorial tax residency situations. I uploaded my docs and they clarified everything about my Form 8898 requirements and bona fide residency status. Their system reviewed my situation and explained exactly what documentation I needed to keep to prove my territory status. The coolest part was they predicted what the IRS would look for if questions ever came up about why I wasn't filing federal returns.

I tried taxr.ai after my initial skepticism and wow - totally worth it! They reviewed my situation (I'm in USVI making just over the threshold) and found I'd been misinterpreting my bona fide residency status for two years! They showed me exactly how to correct my previous filings and helped me understand how the Form 8898 requirements applied to my specific situation. They even provided me with a personalized document checklist for proving my territorial residency status if I ever get questioned. Saved me potentially thousands in penalties down the road. Sometimes specialized services really do know more than the general info you find online.

If you're concerned about the IRS questioning your status, you might want to try Claimyr (https://claimyr.com). I was in a similar situation in Puerto Rico and got a notice from the IRS asking why I hadn't filed. I couldn't get through to anyone at the IRS for weeks - constant busy signals and disconnects. Claimyr got me connected to an actual IRS agent in under 45 minutes. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c. The agent confirmed that with my territorial tax returns and documentation of residence, I had nothing to worry about. They made a note in my file about my bona fide resident status so it shouldn't come up again.

I need to eat my words. After weeks of failed attempts to reach the IRS about my American Samoa residency questions, I tried Claimyr in desperation. Got connected to an IRS territory specialist in 37 minutes when I had previously wasted 9+ hours on hold. The agent confirmed exactly what I needed to document my bona fide residency status and explained that even though I'm under the threshold for Form 8898, keeping records of my territorial tax filings is crucial. They also told me the most common triggers for territory resident audits are maintaining too many connections to the mainland or failing to establish genuine ties to the territory.

Quick point that hasn't been mentioned - if your income increases and pushes you over the $75,000 threshold in future years, you'll need to file Form 8898 at that time. The form is only required in the year your bona fide residency begins or ends, or when your income first exceeds the threshold. Also, while territory tax authorities do share some info with the IRS, the systems aren't perfectly integrated. Keep your documentation organized in case you need to prove your status later.

Has anyone used TurboTax or other tax software to handle territorial tax situations? I'm moving to Puerto Rico next month and trying to figure out the best way to handle my taxes.

Great question about the income threshold! The $75,000 limit exists because the IRS recognizes that lower-income bona fide residents pose minimal tax compliance risk. Most tax evasion schemes involve higher amounts, so focusing resources on tracking higher earners makes sense administratively. Your approach of keeping good documentation is smart. I'd recommend maintaining: - Annual territorial tax returns - Documentation of days spent in the territory vs mainland - Employment records showing work location - Bank statements showing primary financial activity in the territory The information sharing between IRS and territorial tax authorities isn't perfect, but it does exist. If you ever get questioned, your territorial tax filing history will be your strongest defense. Since you're consistently under the threshold and filing locally, you're doing everything correctly. One thing to consider - if your income approaches $75,000 in future years, you might want to file Form 8898 voluntarily just to establish the paper trail before it becomes required.