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.

To file the various employment tax returns, you need an Employer Identification Number (EIN). To obtain an EIN you need to file Form SS-4 (PR).

FICA taxes are used to finance the Social Security and Medicare systems. You must withhold the employee portion of FICA taxes from your employees' wages and contribute the employer portion of FICA. The FICA taxes consist of two components: the Social Security tax and the Medicare tax.

The forms used to file the Social Security and Medicare taxes in Puerto Rico are: Form 941 (PR), Form 941-X(PR), Form 943 (PR), Form 944-PR, Form 944-X(PR), and Form 1040 (PR) (Anejo H-PR) for household employers.

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 you withheld. This tax return is filed quarterly and is due the last day of the month following the end of the quarter. For example, wages you paid January through March (the first quarter of the year) must be reported on Form 941-PR by April 30.

If you are not an agricultural employer and all of your employees are bona fide residents of Puerto Rico, you may be eligible to file Form 944-PR. The Form 944-PR 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-PR. If you were notified to file Form 944-PR for 2009, you may file Form 944-PR for 2010 to report all wages paid, tips your employees reported to you, and other compensation, and Social Security and Medicare taxes you withheld and paid. Alternatively, if you wish to file quarterly Forms 941-PR instead, you may opt out of filing Form 944-PR by telephone no later than April 1, 2010, or in writing no later than March 15, 2010. Employers who want to file a Form 944-PR for the first time in 2010 and are eligible, can opt in to filing a Form 944-PR during the same election period by the same methods. Revenue Procedure 2009-51 has more information about the election, including contact phone numbers and mailing addresses.

Most employers are required to deposit their FICA taxes before Form 941-PR is filed. If you are filing Form 944-PR, you may be able to pay your FICA taxes with your return. For additional information about Form 941-PR, refer to Tax Topic 758, in English. For more information about the Form 944-PR, refer to the Form 944-PR Instructions in Spanish. For information about the rules to make deposits, refer to Tax Topic 757, in English.

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, Household Employer's Tax Guide, in English. File Form 1040 (PR) (Anejo H-PR) 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, baby-sitters, 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) 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 15Publication 179 (Spanish version) explain the requirements for deposits.

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 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 Schedule H-PR (Form 1040) for household employees, employers in Puerto Rico who are subject to FUTA are required to file Form 940-PR 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 employee' salaries.