What is Form 5074?
Form 5074, Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI), is a form that asks for information on a person’s individual tax returns for the purpose of ensuring that the correct amount of tax owed to Guam or the CNMI is calculated. The form asks for some identifying information, such as name and social security number, but mostly requires information on business losses and income throughout the tax year.
In order for the Internal Revenue Service (IRS) to calculate the amount of tax owed to Guam or the CNMI, it requires information from a taxpayer regarding their income in the concerned area. This will often also require some information from Form 1040, Individual Income Tax Return.
Guam and the CNMI have their own tax systems that, while based on US tax laws, are separate from the US’ own tax systems. Because of this, US residents and resident aliens must file IRS Form 5074 to ensure that they pay the correct amount of tax to the correct federal tax system if they earn a certain amount of income from Guam or the CNMI within the tax year.
If a person recently became or ceased to be a bona fide resident of Guam or the CNMI, they must file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a US Possession to inform the IRS of the change, so that they are aware of what tax return forms you must fill out. Failure to submit Form 8898 and any other forms including Form 5074, will result in a $1000 fine being imposed for each form that was not submitted, in addition to any criminal penalties as imposed by law, unless proof is provided that there is a reasonable explanation for the failure to provide the necessary information and not willful neglect.
This form, after being accomplished, must be submitted alongside all other documents that must be submitted with Form 1040.
Who needs to use Form 5074?
A person must fill out Form 5074 if they meet the following conditions:
- They file a U.S. income tax return.
- They report adjusted gross income (AGI) of $50,000 or more.
- At least $5,000 of the gross income on their return is from either Guam or CNMI sources.
In the case of a joint tax return, a person’s spouse must also fill out Form 5074 if they meet the above conditions. If only one spouse is a bona fide resident of Guam or the CNMI for the entire tax year, then Form 5074 need only be filled out if the spouse with the higher Adjusted Gross Income (AGI) was not a bona fide resident of Guam or the CNMI for the tax year.
If a person is a bona fide resident of Guam or the CNMI for the entire tax year, then they need not fill out Form 5074. In this situation, they must instead file a tax return with the relevant government department of Guam or the CNMI.
How to fill out Form 5074?
While Form 5074 may seem intimidating, it is actually a very simple form to fill out. It will help to have your accomplished Form 1040 and any other relevant documents to your businesses and income from Guam or the CNMI with you to ensure that you enter and calculate the correct information for your tax returns.
Pages 3 and 4 of Form 5074 also include information on requirements, exceptions, and particular details on how to fulfill certain steps in the Form.
Enter your name as written in Form 1040 here.
Social Security Number
Enter your Social Security Number here.
Part I - Income from Guam or the CNMI
Make sure that you enter the necessary information in the corresponding column of Guam or CNMI.
Enter your total income from wages, salaries, tips, and et cetera earned in Guam or the CNMI.
Enter your amount of Taxable Interest here.
Enter your Ordinary Dividends here.
Enter the total of any taxable refunds, credits, or offsets of local Guam or CNMI income taxes here.
Enter any Alimony you have received here.
Enter your total business income or loss here.
Enter your total capital gains or losses here.
Enter the total of any other gains or losses throughout the year here.
Enter the total taxable amount of any Individual Retirement Account (IRA) distributions you have here.
Enter the total taxable amount of your pensions and annuities here.
Enter the total of your rental real estate, royalties, partnerships, trusts, S corporations and et cetera here.
Enter your total farm income or loss here.
Enter the total of any unemployment compensation you have received here.
Enter the total amount of taxable social security benefits you have here.
Enter any other income you have here. Enter the type of income in the space provided, and the amount of income in the necessary column. If you have more than one other type of income, you may use a separate sheet of paper to note these other types and the amount earned for each of them. If you have no other type of income, you may leave this part blank.
Add the amounts entered in lines 1 through 15 and enter the sum here.
Part II - Adjustments to Income from Guam or the CNMI
Enter your total educator expenses here.
Enter the total of your relevant expenses as a reservist, performing artist, and/or fee-basis government official here.
Enter your health savings account deduction here.
If you are a member of the armed forces, enter your moving expenses here.
Enter the deductible portion of your self-employment tax here.
Enter your self-employed SEP, SIMPLE, and qualified plans here.
Enter your self-employed health insurance deduction here.
Enter the total of any penalties incurred on early withdrawal of savings here.
Enter any IRA deductions here.
Enter any deductions from student loans here.
Lines 27 and 28
These lines are reserved for future use. Leave them blank unless prompted to fill them out.
Add lines 17 through 28 and enter the sum here.
Subtract Line 29 from Line 16.
Part III - Payments of Income Tax to Guam or the CNMI
Enter your payments on estimated tax returns filed with Guam or the CNMI
Enter the amount of income tax withheld from your wages while you were employed by the US Government as a civilian in Guam or the CNMI.
Enter the amount of income tax withheld from your wages while employed as a member of the US armed forces in Guam or the CNMI.
Enter any amount of income tax withheld from your wages earned in Guam or the CNMI besides the amounts entered in Line 32 and 33.
Add lines 31 through 34 and enter the sum here.
Submission of Form
Attach this form to your Form 1040 or 1040-SR. If you are including a check or money order with your tax return, file your tax return (Form 1040 or 1040-SR with Form 5074) with the Internal Revenue Service, P.O. Box 1303, Charlotte, NC 28201-1303 USA.
If you are not enclosing a check or money order, file your tax return with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215 USA.
Tips when filling out Form 5074
Because Form 5074 is a tax return form, it is important to make sure that you keep it in a safe place to avoid any issues and to keep personal data like your social security number from being compromised.
Prepare the necessary, relevant documents. Having these documents ready will make filling out Form 5074 much easier and more simple, and will help you to ensure that all information you enter is updated and correct.
Submit the form on time. Make sure that you take note of any deadlines set by the IRS surrounding the proper filing of tax returns in order to avoid legal issues and fines.
Practice good contract management. Make sure to create copies of the filled out form, and keep them in a safe and organized area for record or for other possible future purposes.