Employment Taxes in Puerto Rico

Employment Taxes in Puerto Rico

Today we’re going to embark on a tropical journey through the fascinating world of taxes in Puerto Rico. So grab your favorite drink, sit back, and let’s dive in.

Social Security and Medicare

In Puerto Rico, you’ll encounter FICA taxes, which help fund the Social Security and Medicare systems. Think of it like a tag team, with both the employer and employee contributing 6.2% each for Social Security and 1.45% each for Medicare. That’s a combined 12.4% for Social Security and 2.9% for Medicare.

Additional Medicare Tax

If an employee earns more than $200,000 in a year, they’re hit with a 0.9% Additional Medicare Tax, and you, the employer, are responsible for withholding it. Don’t worry; you won’t have to match this extra tax.

Forms to File

When it comes to tax forms, Puerto Rico has a smorgasbord of options:

  • Form 941-PR: For non-agricultural employers to report Social Security and Medicare taxes quarterly.
  • Form 944: For eligible non-agricultural employers to report these taxes annually.
  • Tax Deposits: You’ll need to deposit FICA taxes before filing Forms 941-PR or 944.
  • Household Employees: Use Anexo H-PR (Formulario 1040-PR) to report and pay Social Security and Medicare taxes for household employees (like housekeepers and babysitters).
  • Agricultural Employees: Use Form 943-PR for reporting FICA taxes for agricultural employees.
  • Federal Unemployment Taxes: Non-agricultural and household employers use Form 940-PR to report and pay FUTA taxes.

Form 941-PR

If you’re not an agricultural employer, you’ll file Form 941-PR quarterly. Just remember that it’s due the last day of the month following the end of each quarter.

Form 944

If your estimated employment tax liability is $1,000 or less for the entire calendar year, you can file Form 944 annually instead. It’s due by January 31 after the end of the calendar year.

Tax Deposits

Most employers need to deposit their FICA taxes before filing Form 941-PR. If you’re filing Form 944, you might be able to pay your FICA taxes with your return. Just make sure you follow the rules for making deposits.

Household Employees

If you pay cash wages to a household employee, you may need to withhold and pay FICA taxes. File Anexo H-PR (Formulario 1040-PR) to report and pay these taxes.

Agricultural Employees

For agricultural employers, you’ll use Form 943-PR to report FICA taxes for your employees. It’s filed annually and is due by January 31 after the end of the calendar year.

Federal Unemployment Taxes

Last but not least, you might need to file a Federal Unemployment (FUTA) Tax Return. Check Publication 51 if you’re an agricultural employer or Publication 926 if you’re a household employer. All other employers should refer to Publication 15 or Publication 179. Use Form 940-PR to report and pay FUTA taxes, which are due by January 31 after the end of the calendar year.
And there you have it! We hope this friendly guide helps you navigate the sunny shores of Puerto Rico’s tax system. Remember, when in doubt, consult a tax professional or the IRS for guidance. Happy tax filing!

***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**

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