Guam, as a U.S. territory, has a unique tax system that mirrors many aspects of the federal tax system but also includes its own specific regulations. Understanding these obligations is crucial for employers operating in Guam to ensure compliance and avoid penalties. This guide provides a comprehensive overview of employer tax obligations and employee tax deductions in Guam for 2025, covering social security and payroll taxes, income tax withholding, employee deductions, compliance deadlines, and special considerations for foreign workers and companies.
Employer Social Security and Payroll Tax Obligations
Employers in Guam are responsible for withholding and remitting social security and Medicare taxes, which are collectively known as Federal Insurance Contributions Act (FICA) taxes. The employer and employee each pay a portion of these taxes.
- Social Security Tax: The social security tax rate for both employers and employees is 6.2% of taxable wages, up to an annual wage base limit. For 2025, this wage base is projected to be around $168,600, but employers should verify the official amount when it is announced.
- Medicare Tax: The Medicare tax rate is 1.45% for both employers and employees on all taxable wages. There is no wage base limit for Medicare tax.
- Additional Medicare Tax: Employers are also responsible for withholding an Additional Medicare Tax of 0.9% from wages paid to employees whose income exceeds $200,000 in a calendar year. The employer does not match this additional tax.
- Guam Unemployment Tax: Employers are required to pay Guam unemployment insurance tax. The rate and wage base vary; employers should consult the Guam Department of Labor for the current rates and thresholds.
Income Tax Withholding Requirements
Employers in Guam must withhold federal income tax from their employees' wages based on the information provided on Form W-4 (Employee's Withholding Certificate). The amount of income tax to withhold depends on the employee's filing status, number of dependents, and other factors.
- Withholding Tables: The IRS provides withholding tables that employers use to calculate the amount of federal income tax to withhold. These tables are updated annually.
- Form W-4: Employees must complete Form W-4 to indicate their withholding preferences. Employers should ensure that employees complete this form accurately.
- Guam Territorial Income Tax: Guam operates under a mirror system, meaning that the U.S. federal income tax laws apply in Guam as Guam Territorial Income Tax (GTIT). Employers withhold and remit income taxes to the Guam Department of Revenue and Taxation (DRT).
Employee Tax Deductions and Allowances
Employees in Guam can claim various deductions and allowances to reduce their taxable income. These deductions can be claimed on their individual income tax returns.
- Standard Deduction: The standard deduction is a fixed amount that depends on the employee's filing status. For 2025, the standard deduction amounts are projected to be:
- Single: $14,600
- Married Filing Jointly: $29,200
- Head of Household: $21,900
- Itemized Deductions: Instead of taking the standard deduction, employees can itemize deductions if their total itemized deductions exceed the standard deduction amount. Common itemized deductions include:
- Medical expenses exceeding 7.5% of adjusted gross income (AGI)
- State and local taxes (SALT) up to $10,000
- Home mortgage interest
- Charitable contributions
- Above-the-Line Deductions: These deductions are subtracted from gross income to arrive at adjusted gross income (AGI). Examples include:
- Contributions to traditional IRAs
- Student loan interest payments
- Health savings account (HSA) contributions
Tax Compliance and Reporting Deadlines
Employers in Guam must adhere to specific tax compliance and reporting deadlines to avoid penalties.
- Form 941: Employers must file Form 941 (Employer's Quarterly Federal Tax Return) to report income taxes, social security tax, and Medicare tax withheld from employees' wages. This form is typically due on the last day of the month following the end of the quarter (April 30, July 31, October 31, and January 31).
- Form W-2: Employers must provide Form W-2 (Wage and Tax Statement) to employees by January 31 of each year, reporting the employee's wages and taxes withheld for the previous year.
- Form W-3: Employers must file Form W-3 (Transmittal of Wage and Tax Statements) with the Social Security Administration, summarizing the information reported on Form W-2. The deadline for filing Form W-3 is also January 31.
- Guam Department of Revenue and Taxation (DRT) Filings: Employers must also comply with local Guam tax filing requirements, including remitting withheld income taxes and filing any required territorial tax returns. Check the DRT website for specific deadlines and forms.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers and companies operating in Guam may have special tax considerations.
- Residency Status: The tax treatment of foreign workers depends on their residency status. Nonresident aliens are generally taxed only on income sourced in the United States (including Guam), while resident aliens are taxed on their worldwide income.
- Tax Treaties: The United States has tax treaties with many countries that may affect the taxation of foreign workers and companies in Guam. These treaties can provide reduced tax rates or exemptions from certain taxes.
- Foreign Corporations: Foreign corporations doing business in Guam may be subject to U.S. corporate income tax on their effectively connected income (ECI). They may also be subject to a branch profits tax.
- Form 8233 and W-8BEN: Foreign workers may need to complete Form 8233 (Exemption From Withholding on Compensation for Independent and Certain Dependent Personal Services of a Nonresident Alien Individual) or Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) to claim treaty benefits or exemptions from withholding.
Employers should consult with a tax professional to ensure compliance with all applicable tax laws and regulations in Guam, especially when dealing with foreign workers or companies.
