“In America, there are two tax systems; one for the informed and one for the uninformed. Both systems are legal…” Judge Learned Hand From my clients, I constantly hear reasons not to fully realize the benefits available in the Internal Revenue Code. “It’s too good to be true!” “If this was real, everyone would know
A common question arises among Act 60 business owners: what are the tax implications of spending part of the year working remotely from abroad? This article examines a hypothetical case study to highlight the critical considerations for Act 60 entrepreneurs, emphasizing the need for strategic planning to avoid significant tax and legal complications. Background: Joe,
Taxable Income: Gross Income Minus Deductions In the U.S., income tax applies to taxable income, which is calculated as gross income minus eligible deductions. Exempt or Excluded Income and Related Expenses Certain types of income, such as Puerto Rican-source income earned by bona fide residents of Puerto Rico, can be excluded from U.S. taxable income.
A bona fide resident of Puerto Rico may generally exclude income derived from Puerto Rican sources from U.S. taxable income. Since only income sourced within Puerto Rico qualifies for this exclusion, it’s crucial to understand which types of income are considered Puerto Rican-sourced and which are not. The rules for sourcing income differ depending on
Question: If a U.S. citizen forms a Puerto Rican corporation (or Puerto Rico LLC classified as a corporation for U.S. tax purposes) and contributes capital, is IRS notification required? Answer: Yes. A Puerto Rican entity is treated as a foreign corporation, so U.S. citizens contributing capital must file Form 926, Return by a U.S. Transferor
Bona Fide Residency in Puerto Rico To qualify as a bona fide resident of Puerto Rico, an individual must satisfy three primary tests: the presence test, the tax home test, and the closer connection test. Illustrative Example: Sarah’s Journey to Residency Sarah, a U.S. citizen from Massachusetts, works at a private equity firm. Married with