Form 8898 Filing Requirements for U.S. Territory Residents & Paying 2023 Tax

The good news is that your tax situation is actually simpler than you might think! For your first question about Form 8898 - you don't need to file it if your income is below $75,000. The form is specifically for reporting a change in residency to a U.S. territory, but the instructions clearly state that you only need to file it if your worldwide gross income is more than $75,000 for the year. Since you're only at $35k, you can skip this form entirely. Regarding filing requirements - if you're a bona fide resident of Guam, you generally file your tax return only with Guam, not with the IRS. Your worldwide income (including your Guam government salary) is reported on that return. The key is establishing that you're truly a bona fide resident, which requires things like permanent housing there, community ties, etc. For your savings bonds - yes, the interest from U.S. savings bonds is federally taxable income. However, you wouldn't use Schedule D for this, as bonds aren't capital assets. Instead, the interest would be reported as interest income on Schedule B if required (if total interest exceeds $1,500) or directly on your 1040. Since you're filing with Guam, you'd report this on your Guam territorial return.

I had almost the exact same situation last year when I moved to the USVI. I was so confused trying to figure everything out myself and wasted hours on the IRS website. Then I found https://taxr.ai and it saved me so much time. You upload your documents and it analyzes your specific residency situation. I uploaded my employment contract with the territorial government, proof of my housing in the USVI, and my previous year's tax return. The system immediately confirmed I was a bona fide resident and didn't need to file Form 8898 since I was under the $75k threshold. It also told me I only needed to file with the territory tax office and not with the IRS. The best part was it organized all my supporting documents in case I ever got questioned about my residency status.

I just wanted to follow up about my experience with taxr.ai. I was skeptical at first (as you can see from my previous comment), but after struggling with my Puerto Rico residency situation, I decided to give it a try. Honestly, I was blown away. The system immediately flagged that I didn't need to file Form 8898 since I was under the income threshold, just like OP's situation. It also correctly determined I only needed to file with Puerto Rico's tax authority since I met the bona fide residency test. The document organization feature was clutch - it compiled all my evidence of residency (lease, utility bills, driver's license) into a single PDF with a summary page explaining my tax position. Feeling much more confident about my filing now and saved about $400 compared to what an accountant quoted me.

If you need to speak with the IRS to confirm your filing requirements (which I HIGHLY recommend), use https://claimyr.com to get through to them. I spent 3 weeks trying to get someone on the phone about my Guam residency status last year, always getting disconnected after waiting on hold for hours. Used Claimyr and got a callback from the IRS in about 20 minutes. The agent confirmed I didn't need to file Form 8898 since I was under the $75k threshold and explained exactly how to handle my bond interest from stateside banks. They also have a video showing how it works: https://youtu.be/_kiP6q8DX5c Having an actual IRS agent confirm my filing status gave me total peace of mind. I was terrified of doing it wrong and getting hit with penalties later.

I have to eat my words about Claimyr. After posting my skeptical comment, I was still struggling to get through to the IRS about my American Samoa tax situation. Out of desperation I tried the service. Got a callback in about 45 minutes (midday on a Thursday). The IRS agent was super helpful and confirmed that as a bona fide resident of American Samoa under the $75k threshold, I didn't need Form 8898. She also explained exactly how to handle my mainland rental property income on my territorial return. I've been trying to reach the IRS for THREE MONTHS with no success. Should have done this way earlier and saved myself a ton of stress. Sorry for being so cynical before!

Just to add a bit more info about bona fide residency in territories - I've lived in USVI for 10 years and dealt with this every year. The critical factors are: 1. Physical presence (sounds like you've got this covered) 2. No tax home in the US (also seems fine for you) 3. Closer connection to the territory than the US The closer connection test is the trickiest. Do you have a permanent home there? Bank accounts? Driver's license? Registered to vote? The more connections you have to Guam rather than Hawaii, the better.

One thing nobody mentioned - make sure you keep REALLY good records of when you physically left Hawaii and arrived in Guam. My friend got audited over his USVI status and they wanted exact dates with proof (flight itineraries, etc).

Great advice from everyone here! As someone who went through a similar transition moving to Puerto Rico, I wanted to add that you should also be aware of Guam's specific territorial tax laws since they can differ from other territories. Since you're working for the Guam government, you'll likely need to file Form 1040GU (Guam's version of the 1040) rather than a standard U.S. return. Guam follows most federal tax laws but has some unique provisions, especially for government employees. Also, regarding your savings bonds - definitely keep all the documentation from when you cashed them out, including the exact dates and amounts. Even though you'll report this on your Guam return rather than federal, having clear records will help if there are any questions later. One last tip: consider getting a Guam tax ID number if you haven't already. It makes the filing process smoother and establishes another paper trail for your residency status. You can apply through the Guam Department of Revenue and Taxation. Sounds like you're well on your way to establishing bona fide residency with all those connections you mentioned! The anxiety is totally normal - territorial tax situations can feel overwhelming at first, but you're asking all the right questions.