source income as a retired Administrative Law Judge) you can prepare the returns using TurboTax, adding Form 8989 manually in attachment sequence order in the copy that goes to the IRS and as the first page of the return that goes to the VIBIR.
You will not be able to efile either return through TurboTax. The VIBIR does not support electronic filing and TurboTax does not support electronic filing of Form 8689. Form 8689 is a form that can be filed with the IRS electronically; however if you prepare your return using TurboTax, you will have to pay someone other than TurboTax to submit the return to the IRS electronically.
I started submitting taxpayer returns electronically the first year electronic filing was available in Southern California. I believe I was one of the first taxpayers or tax preparers to point out to the the Director of the VIBIR that the "official" IRS instructions on Form 8689 are incorrect, as noted above.
Harris Angell
P.S. Put all the W-2 Federal withholding and other prepayments and W-2VI withholding and other USVI prepayments in the Federal income tax TurboTax input. Do not put Virgin Islands tax payments in state tax payments. However, put state tax prepayments in the state tax input (this does not apply to Texans or residents of any other state that does not have a state income tax). The USVI is a territory, not a state (IRC sec,7701 (a)(9). If you only file with the VIBIR, the return will come out correct for filing. Any Self-Employment tax needs to be overridden to zero on page two, and only on page two of Form 1040 (one half of self-employment tax is an adjustment to income in the USVI), and Form 1040 needs to be prepared and filed using the figures generated by TurboTax. If you file with both the VIBIR and the IRS the total tax prepaid will come out correct, You will do the allocation when you prepare Form 8689.
