Persons Employed in a U.S. Possession / Territory – Federal Income Tax Withholding


U.S. territories, or possessions, are islands under the jurisdiction of the United States which are not States of the United States. U.S. territories can be divided into two groups:

  1. Those that have their own governments and their own tax systems (Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, and The Commonwealth of the Northern Mariana Islands), and
  2. Those that do not have their own governments and their own tax systems (Midway Island, Wake Island, Palmyra Island, Howland Island, Johnston Island, Baker Island, Kingman Reef, Jarvis Island, and other U.S. islands, cays, and reefs that are not part of any of the fifty states).

The governments of the first group of territories impose their own income taxes and withholding taxes on their own residents. To determine the income tax withholding requirements in any of the territories in the first group, you should consult the local tax department of each of these territories. Information about the governments and taxes of some of the U.S. territories may be accessed at State and Local Government on the Net. The addresses of the tax authorities of the U.S. possessions listed in group one above may be found in Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.

Residents of the second group of territories are subject to U.S. income taxes and the withholding of federal income taxes.

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