Federal Employment Tax in Puerto Rico
Employers in Puerto Rico are subject to the taxes imposed by the Federal Insurance Contribution Act (FICA) (Social Security and Medicare taxes) and the Federal Unemployment Tax Act (FUTA). An employer is a person or organization for whom a worker performs services as an employee. As an employer you are required to withhold, report, and pay employment taxes on wages paid.
To file the various employment tax returns, you need an Employer Identification Number (EIN). If you do not have an EIN, you may apply for one online at the IRS.gov website, www.irs.gov, Apply for an Employer Identification Number (EIN) Online link. You may also apply for an EIN by calling 800-829-4933, or you can fax or mail Form SS-4PR (PDF).
FICA taxes are used to finance the Social Security and Medicare systems. FICA taxes consist of two components: the social security tax and the Medicare tax. You must withhold the employee portion of FICA taxes from your employees’ wages and contribute the employer portion of FICA tax. The current tax rate for social security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total.
Beginning January 1, 2013, the Additional Medicare Tax applies to an individual’s Medicare wages that exceed a threshold amount based on the taxpayer’s filing status. Employers are responsible for withholding the 0.9% Additional Medicare Tax on an individual’s wages paid in excess of $200,000 in a calendar year. An employer is required to begin withholding Additional Medicare Tax in the pay period in which it pays wages in excess of $200,000 to an employee. There is no employer match for Additional Medicare Tax.
The forms used by employers in Puerto Rico to report the social security and Medicare taxes are: Form 941-PR (PDF), Form 943-PR (PDF), Form 944 (PDF) or Form 944(SP) (PDF), and Form 1040-PR (Anexo H-PR) (PDF) for household employers. In addition, the forms used by employers in Puerto Rico to make corrections to employment taxes are: Form 941-X (PR) (PDF), Form 943-X (PR) (PDF), Form 944-X (PDF), Form 944-X (SP) (PDF), Form 944-X (PR) (PDF), and amended Form 1040-PR (Anexo H-PR) (PDF).
Form 944-PR (PDF), Planilla para la Declaración Federal ANUAL del Patrono, will no longer be issued by the IRS after 2011. Beginning with tax year 2012, employers who previously filed Form 944-PR will continue to file annually on Form 944 (or Form 944 (SP), Declaración Federal ANUAL de Impuestos del Patrono o Empleador, the Spanish language equivalent of Form 944). Employers may request to file Form 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono, instead of Form 944.
If you are not an agricultural employer and all of your employees are bona fide residents of Puerto Rico, file Form 941-PR to report all wages paid, tips your employees reported to you, and other compensation, and social security and Medicare taxes. Form 941-PR is filed quarterly and is due the last day of the month following the end of the quarter. For example, for wages you paid January through March (the first quarter of the year) Form 941-PR is due April 30.
If the due date for filing a return falls on a Saturday, Sunday or legal holiday, you may file the return on the next business day. The term “legal holiday” means any legal holiday in the District of Columbia. For a list of legal holidays see Publication 15, (Circular E), Employer’s Tax Guide, or visit IRS.gov and enter the words “legal holidays” in the search box.
If you are not an agricultural employer, you may be eligible to file annual Form 944 (or Form 944(SP), the Spanish language equivalent of Form 944). The Form 944 generally is filed annually and is due the last day of January following the end of the tax year. Employers that have an estimated employment tax liability of $1,000 or less for the entire calendar year are eligible to file an annual Form 944.
Employers are not permitted to file Form 944 unless they are notified by the IRS that they qualify to file this form. Employers who may be eligible to file Form 944, because their estimated annual employment tax liability is $1,000 or less, have to contact the IRS to elect to file annually (Form 944). Employers required to file Form 944, who want to file Forms 941-PR instead, must notify the IRS they are electing to file quarterly Forms 941-PR and opting out of filing Form 944. For further information, see Revenue Procedure 2009-51 and the Form 944 Instructions.
Employers notified to file Form 944, whose businesses grow during the year and exceed the $1,000 eligibility threshold must still file Form 944 for the year. Employers who exceed the eligibility threshold will be notified by the IRS that their filing requirement has been changed to Form 941-PR for a particular year.
Most employers are required to deposit their FICA taxes before filing Form 941-PR. If you are filing Form 944, you may be able to pay your FICA taxes with your return. For additional information about the Form 941-PR (PDF), refer to Topic 758, in English, or see the Form 941-PR Instructions in Spanish. For more information about the Form 944 (PDF), refer to Topic 758 or see the Form 944 Instructions in English. For information about the rules to make deposits, refer to Topic 757, in English. If you have deposited all your tax on time, you have 10 additional days to file.
If you pay a household employee cash wages, you may be required to withhold and pay FICA taxes on all wages you pay to that employee. To see if you are required to withhold and pay these taxes, see Publication 926 (PDF), Household Employer’s Tax Guide, in English. File Form 1040-PR (Anexo H-PR) (PDF) to report and pay social security and Medicare taxes corresponding to the employer and the employee for all household employees.
Household employees include housekeepers, maids, babysitters, gardeners, and others who work in or around your residence as your employee. Repairmen, plumbers, contractors, and other business people who are self-employed and own their equipment and control how the work is performed, normally are not considered household employees.
If you are an agricultural employer in Puerto Rico, you must file Form 943-PR (PDF) to report the employer’s and the employee’s share of the FICA taxes for agricultural employees. To see if you are required to withhold and pay FICA taxes on your agricultural employees, refer to Publication 51, (Circular A), Agricultural Employer’s Tax Guide, in English. Form 943-PR is an annual return you file at the end of each calendar year and is due January 31. Most employers are required to deposit both the employer and employee portions of FICA taxes before the Form 943-PR is filed.
Publication 15 in English and Publication 179 (PDF) in Spanish, explain the requirements for deposits.
Federal Unemployment Taxes (FUTA):
If you are an employer in Puerto Rico, you might have to file a Federal Unemployment Tax Return. To see if you are required to pay FUTA taxes, refer to Publication 51 if you are an agricultural employer, or Publication 926 (PDF) if you are a household employer. All other employers should refer to Publication 15 or Publication 179 (Spanish version). With the exception of those who use Anexo H-PR (Form 1040) for household employees, employers in Puerto Rico who are subject to FUTA are required to file Form 940-PR (PDF) to report and pay FUTA taxes. Form 940-PR is generally due by January 31. Most employers are required to deposit FUTA taxes. FUTA taxes are not withheld from the employees’ wages. The FUTA tax rate was decreased to 6.0% beginning July 1, 2011.
Source: Internal Revenue Service
Last reviewed: September 21, 2013