Making it through the wild ride of employment taxes in Puerto Rico
So, you’re an employer in sunny Puerto Rico, and you just realized you need to handle some U.S. employment taxes. But don’t sweat it! Let’s dive into the wonderful world of taxes with a twist of humor and simple language so you can easily understand what’s going on.
First things first, you’ll need an Employer Identification Number (EIN). It’s like a Social Security number for your business. You can apply for one online or by mail. Now, let’s move on to the main attractions: Social Security, Medicare, and Federal Unemployment taxes.
Social Security and Medicare taxes, also known as FICA taxes, are like a two-for-one deal. As an employer, you need to withhold a portion from your employees’ wages and contribute an equal amount yourself. For Social Security, it’s 6.2% from both you and your employee. For Medicare, it’s 1.45% each. Easy peasy, right?
But wait, there’s more! If you’re paying an employee over $200,000 a year (lucky them!), you also need to withhold an Additional Medicare Tax of 0.9%. And no, you don’t need to match this one. For more info, check out Form 8959 and the IRS’ Questions and Answers for the Additional Medicare Tax.
Now let’s talk forms. Employers in Puerto Rico have a colorful assortment of forms to report Social Security and Medicare taxes. Some of the stars include Form 941-PR, Form 943-PR, Form 944 (or Form 944 (SP) for our Spanish-speaking friends), and Anexo H-PR (Formulario 1040-PR) for household employers.
In most cases, you’ll be depositing your FICA taxes before filing any forms. It’s like paying for your meal before leaving the restaurant.
If you’re employing someone for household work, like a babysitter or gardener, you’ll need to file Anexo H-PR (Formulario 1040-PR). But don’t worry about the plumber, they’re self-employed and not your responsibility in this case.
Now, let’s talk about Federal Unemployment (FUTA) taxes. These taxes are like the cherry on top of the employment tax sundae. To find out if you need to pay FUTA taxes, refer to Publication 51 for agricultural employers, Publication 926 for household employers, and Publication 15 or Publication 179 for everyone else. Most employers in Puerto Rico who are subject to FUTA will need to file Form 940-PR. And remember, FUTA taxes are not withheld from your employees’ wages.
Whew! We made it through the wild ride of employment taxes in Puerto Rico. With this newfound knowledge, you can confidently tackle those taxes like a pro. And who knows? Maybe you’ll even find a bit of humor in the process.
***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**