Where and how to report W-2GU income from Guam on 1040 form?

This is a specific situation that requires careful handling. When you have income from a US territory like Guam reported on Form W-2GU, you need to include this income on your US tax return, but there are additional steps to follow. You'll need to complete Form 5074 (Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands) to properly allocate the income. On Form 1040, you'll report the total of all W-2 income (including the W-2GU amounts) in Box 1 of the 1040. Then Form 5074 will help determine what portion of the tax is allocated to Guam. Since they were residents of Guam for part of the year and then moved to Nevada, they're considered part-year residents of both places. The Form 5074 is crucial because it prevents double taxation on the same income. Make sure to attach all W-2 and W-2GU forms to the paper return. You're correct that this return must be paper-filed - electronic filing isn't available when Form 5074 is included.

I actually had a similar situation last year and found using https://taxr.ai incredibly helpful with my territorial income reporting. I was working in the US Virgin Islands for 8 months and then moved back to the mainland, so I had both regular W-2s and W-2VI forms. The documentation requirements were really confusing me, especially figuring out which forms needed to be filed with which tax authority. I uploaded my W-2s and previous returns to taxr.ai and it analyzed everything and walked me through the correct filing procedure step by step. It spotted some allocation issues I would have definitely messed up on my own. For your Guam situation, the site should be able to help you understand exactly how to report the W-2GU income and complete Form 5074 correctly. They have specific guidance for US territories tax situations that's way more detailed than what I found on the IRS website.

I want to follow up about my experience with taxr.ai that I mentioned being skeptical about. I ended up giving it a try since I was getting nowhere with my own research on handling income from American Samoa. I have to admit it was actually really helpful! The system identified exactly which parts of my income needed to be reported where, and it explained the allocation rules between US and territorial tax systems in a way that finally made sense. The documentation was super detailed and included references to the specific IRS publications I needed. What surprised me most was how it handled the more unusual aspects of territorial income - like explaining which credits can be claimed on which return and how to avoid double taxation. Definitely saved me from making some mistakes that probably would have triggered notices or audits.

If you're struggling to get answers about your Guam W-2GU situation from the IRS, I'd recommend using Claimyr (https://claimyr.com). I was in a similar situation with income from the Northern Mariana Islands and kept getting disconnected or waiting for hours on the IRS help line. Claimyr got me through to an actual IRS representative in about 20 minutes after I had been trying on my own for days. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c The IRS rep I spoke with was able to clarify exactly how to handle the W-2 from CNMI and confirmed the proper allocation method for Form 5074. They also explained which supporting documents needed to be attached to my paper return. Honestly saved me so much stress since I was about to file incorrectly based on conflicting information I found online.

I need to eat my words about Claimyr. After my skeptical comment, I was still desperate to talk to someone at the IRS about my Puerto Rico income reporting issues, so I decided to try it anyway. Honestly, it worked exactly as advertised. I got a call back in about 35 minutes connecting me to an actual IRS agent who specialized in territorial tax issues. She walked me through exactly how to handle my W-2PR and Form 8898 for my Puerto Rico to Florida move. What I appreciated most was getting to an agent who actually understood territorial tax issues instead of getting transferred multiple times. The agent confirmed I needed to paper file and explained exactly which supporting documents to include. Definitely changed my mind about the service - sometimes solutions that sound too good to be true actually do work.

Make sure you're also considering any potential Guam tax obligations! My brother went through something similar when he worked in Guam for 7 months. In addition to filing Form 5074 with his US return, he also had to file a Guam territorial tax return for the income earned while physically in Guam. The Guam Department of Revenue and Taxation (DRT) has its own requirements that are separate from the IRS. Since your clients were physically in Guam until May 2023, they likely need to file as part-year residents with Guam. One thing my brother learned the hard way: don't assume the W-2GU withholding (even if zero) is correctly reported. He had to request a corrected W-2GU from his employer because they initially didn't report territorial withholding properly.

Don't forget about potential credits for taxes paid! When dealing with territorial income like this, you need to make sure you're not being double-taxed. If your clients paid any tax to Guam on their W-2GU income, they may be eligible for a foreign tax credit on their US return using Form 1116. I went through this with income from Puerto Rico last year. Even though Puerto Rico is a US territory, for tax purposes it's treated as a foreign jurisdiction in many ways. The same applies to Guam. Also, check whether there's any special treatment for moving expenses between a territory and the mainland. There used to be some deductions available for these situations that survived the 2018 tax law changes, but only for moves involving territories.

One important detail I don't see mentioned yet - when you're dealing with W-2GU forms, make sure to check if the employer properly allocated the income between Guam-source and US-source on the forms themselves. Sometimes employers in the territories don't correctly distinguish between income that's truly territorial versus income that should be reported as US-source (like for federal contracts or mainland-based work done while stationed in Guam). Also, since they only have Copy A available for one of the W-2GU forms, they should contact the employer to request the proper copies for filing. The IRS is pretty strict about having the correct document copies attached to paper returns, especially for territorial income situations that are already under closer scrutiny. Another tip: when you complete Form 5074, pay close attention to the income allocation dates. Since they moved mid-year (June 2023), you'll need to clearly document which income was earned during their Guam residency period versus their Nevada residency period. This timing can significantly impact the tax allocation between jurisdictions.