People residing in Guam generally pay taxes to the Government of Guam, which administers a tax system that largely mirrors the U.S. federal income tax laws. However, depending on their specific income sources and residency status, individuals in Guam may be required to file a U.S. federal tax return only, a territory tax return only, or even both returns.
Understanding Guam's Tax System
Guam operates under a "mirror tax" system, meaning that its income tax laws largely mimic the U.S. Internal Revenue Code. The Internal Revenue Code of the United States, as applied to Guam, is known as the Guam Income Tax Law. Consequently, residents of Guam pay income taxes to the Government of Guam's Department of Revenue and Taxation (DRT) using forms and rules that are very similar to those used by U.S. taxpayers filing with the Internal Revenue Service (IRS).
This system means that for most residents with income sourced within Guam, their tax obligation is fulfilled by filing with and paying taxes to the Government of Guam, rather than directly to the U.S. federal government.
When U.S. Federal Tax Returns Are Required
While most Guam residents file with the Guam DRT, there are specific circumstances under which individuals may also need to file a U.S. federal tax return with the IRS. As stated by the U.S. tax authority, individuals with income from U.S. territories like Guam may have to file a U.S. tax return only, a territory tax return only, or both returns.
This requirement often depends on the source and type of income, as well as an individual's specific tax situation.
Common Scenarios for Filing with the IRS:
- U.S. Federal Employees: Federal civilian employees residing in Guam may be required to file U.S. federal tax returns if their income is considered U.S.-sourced and not effectively connected with a trade or business in Guam.
- Military Personnel: Members of the U.S. Armed Forces stationed in Guam often have their tax obligations handled directly through the U.S. federal tax system, as their income is generally considered U.S.-source income.
- U.S.-Source Income: Individuals residing in Guam who have income from sources within the United States (e.g., certain pensions, investments, or rental income from U.S. properties) that is not effectively connected to a Guam trade or business may be required to file a U.S. federal tax return.
- Claiming Certain U.S. Tax Benefits: In some cases, to claim specific U.S. federal tax benefits or credits, individuals in Guam might need to file a U.S. federal tax return in addition to their Guam return.
Overview of Filing Requirements
The table below provides a simplified overview of common tax filing scenarios for individuals in Guam:
| Income Source/Scenario | Filing Requirement | Tax Authority |
|---|---|---|
| Most Guam-Source Income (e.g., local employment) | Territory tax return only | Government of Guam (Department of Revenue & Taxation) |
| U.S.-Source Income (e.g., federal employee salary, certain U.S. investments) | U.S. tax return only (or potentially both) | U.S. Internal Revenue Service (IRS) |
| Both Guam-Source and Specific U.S.-Source Income | Both U.S. and territory tax returns | IRS and Government of Guam (DRT) |
It is important for individuals with complex income situations to understand their specific obligations. Detailed information regarding tax responsibilities for individuals in U.S. territories can be found on the Internal Revenue Service (IRS) website, and specific guidance for Guam taxes is available through the Guam Department of Revenue and Taxation.
