How do I properly report W-2GU income from Guam on my 1040 tax return?

The handling of income from U.S. territories like Guam requires careful attention because of their special tax status. You're on the right track with Form 5074 (Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands). For your parents' situation, you'll need to report ALL income on the U.S. Form 1040, including both the regular W-2 and the W-2GU income. The W-2GU amounts get reported on the 1040 just like any other W-2 income. However, you'll also need to complete Form 5074 to allocate the income properly between the U.S. and Guam. Since your parents were residents of Guam for part of the year before moving to Nebraska, they'll need to file both a U.S. tax return for the full year AND potentially a Guam tax return for the period they were Guam residents. The Form 5074 helps prevent double taxation by properly allocating which jurisdiction gets to tax which portion of their income. And yes, you're correct that returns with Form 5074 must be paper-filed, as the IRS e-file system currently doesn't accept this form electronically.

After struggling with a similar situation last year (had income from Puerto Rico), I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out how to handle territorial income. It analyzes your tax documents and gives personalized guidance on how to report everything correctly. For my situation, I uploaded my W-2PR and mainland W-2s, and it immediately identified that I needed Form 8898 along with some special handling for the territorial income. It even showed exactly which boxes on my 1040 needed to include the Puerto Rico income and which didn't. Saved me a ton of research and probably kept me from making some costly mistakes. Might be worth checking out since Guam income reporting is similarly complicated!

Just wanted to follow up - I actually tried taxr.ai for my USVI income situation and it was incredibly helpful! I uploaded my documents and it immediately flagged that I needed Form 8689 for my situation (different from Guam's Form 5074 but similar concept). What impressed me was how it recognized that I had moved mid-year and calculated exactly what portion of my income should be allocated to USVI. It even pointed out that I could claim a tax credit on my US return for taxes paid to USVI, which my regular tax software completely missed. For anyone dealing with territorial income, whether it's Guam, Puerto Rico, USVI, or American Samoa, I'd definitely recommend checking it out. Saved me from what would have been a massive headache trying to figure this out on my own!

I had a similar nightmare dealing with the IRS about my Guam income last year. After weeks of getting nowhere trying to call the IRS for help, I found this service called Claimyr (https://claimyr.com) that actually got me through to a real IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c They have some way of navigating the IRS phone system that bypasses the usual "all our representatives are busy" message. The agent I spoke with confirmed exactly how to report my W-2GU income and explained that for partial year residents, you need to allocate income between Guam and the US based on your residency dates. Changed my whole perspective on getting tax help - I thought I'd never get through to a human!

I'm coming back to eat my words about Claimyr because I actually tried it yesterday out of desperation. After 3 months of trying to reach someone at the IRS about my amended return, I was connected to an agent in about 25 minutes. The IRS agent was able to confirm that my amended return (which included some foreign income I initially forgot to report) was actually received and gave me an updated timeline for processing. She also answered my questions about how to handle this territorial income issue if it comes up for me in the future. I was 100% convinced this was a scam, but it legitimately works. If you're stuck like I was trying to get answers about how to handle your Guam income, this might be worth trying.

One important thing nobody has mentioned yet - make sure you're tracking the dates your parents lived in Guam vs Nebraska carefully. The IRS will want to see exactly when residency changed. This matters because: 1) Income is generally sourced to where you were when you earned it 2) Your filing requirements change when you become/cease being a bona fide resident of a US territory 3) The tax credits available differ depending on residency status For the W-2GU with only Copy A, I'd also suggest getting a statement from the employer confirming the income amount if you can't get Copy B. The IRS can be picky about documentation.

Has anyone used TurboTax or H&R Block software for a situation like this? Wondering if they handle the 5074 form correctly or if this is really a "see a tax professional" situation?

I've dealt with similar territorial income issues and want to emphasize a few key points that might help: First, regarding the Copy A situation - this is actually more common than you'd think with territorial employers. While Copy B is what taxpayers should receive, having Copy A still allows you to report the income accurately. Just make sure to keep detailed records and consider attaching a brief explanation when you file. Second, since your parents moved mid-year from Guam to Nebraska, pay close attention to the "bona fide resident" test. Your mother, having lived in Guam since early 2021 until June 2023, would likely qualify as a bona fide resident for the portion of 2023 she was there. This affects how the income gets allocated on Form 5074. The key thing to remember is that ALL income (both W-2 and W-2GU) gets reported on the 1040, but Form 5074 determines which portion Guam gets to tax versus the US. Since you're paper filing anyway due to Form 5074, take advantage of this to include any explanatory statements about the Copy A situation or other documentation issues. Given the complexity here, especially with the mid-year move and mixed residency status, this might be worth consulting with a tax professional who has experience with territorial tax issues. The cost could easily pay for itself by avoiding potential errors or missed opportunities for tax savings.