Tax on Social Security and IRA distributions

You should consult an accountant about these questions, really. These aren't simple answers.

Are there specific accountants you recommend or should I just make an appointment with the HR Block group?
Thanks

ReyP wrote:

Are there specific accountants you recommend or should I just make an appointment with the HR Block group?
Thanks

H&R Block folks are tax return preparers and probably do a great job for most of their clients, but in no way have the expertise I would look for in someone whose professional advice I would rely on in a matter such as this.  Look for lawyers and/or CPAs with specific knowledge and expertise in counseling clients moving to Puerto Rico on the tax laws and residency and other requirements. I would not begin to make a recommendation, but perhaps others will.

SawMan wrote:

ReyP wrote:

Are there specific accountants you recommend or should I just make an appointment with the HR Block group?
Thanks

H&R Block folks are tax return preparers and probably do a great job for most of their clients, but in no way have the expertise I would look for in someone whose professional advice I would rely on in a matter such as this.  Look for lawyers and/or CPAs with specific knowledge and expertise in counseling clients moving to Puerto Rico on the tax laws and residency and other requirements. I would not begin to make a recommendation, but perhaps others will.

Hopefully someone can make a recommendationor two. Would be nice to set up appointments ahead of time before I arrive to do research and end up wasting a lot of time finding a CPA, Realtor, Bank, etc then have to waits for a spot on their appointment book.
Thanks

ReyP wrote:

SawMan wrote:

ReyP wrote:

Are there specific accountants you recommend or should I just make an appointment with the HR Block group?
Thanks

H&R Block folks are tax return preparers and probably do a great job for most of their clients, but in no way have the expertise I would look for in someone whose professional advice I would rely on in a matter such as this.  Look for lawyers and/or CPAs with specific knowledge and expertise in counseling clients moving to Puerto Rico on the tax laws and residency and other requirements. I would not begin to make a recommendation, but perhaps others will.

Hopefully someone can make a recommendationor two. Would be nice to set up appointments ahead of time before I arrive to do research and end up wasting a lot of time finding a CPA, Realtor, Bank, etc then have to waits for a spot on their appointment book.
Thanks

Remembering that everyone has something they're trying to sell and without endorsement, maybe this organization offers leads on professional help:

http://www.internationalman.com/article … incentives

Would love to know the answers myself as I will be in same situation. I agree about HR block they are tax preparers and never had any luck with them. A good recommendation would be the best answer. If I find someone will let you know please do the same . Johnny

The IRS has a site online that gives you the details of having a
Puerto Rican residency and what it involves.

Great thanks for info

Hi Rey,

I have not yet moved to Puerto Rico and I am not an accountant but based on the research I've done I can at least provide some of the information I have as a starting point.

Here is a link to an IRS publication that answers some of your questions around the move:
http://www.irs.gov/publications/p570/ch01.html

I do believe you have to pay federal taxes on Social Security income and IRA withdrawals.

Even with Act 22 you would have to pay federal (and Puerto Rico) taxes on Traditional IRA withdrawals.  Act 22 is only applicable to capital gains realized in a non tax-deferred brokerage account while being a bona fide resident of Puerto Rico.  The broker does not have to be based in Puerto Rico.

David

Thank you.......

davidtx wrote:

Hi Rey,

I have not yet moved to Puerto Rico and I am not an accountant but based on the research I've done I can at least provide some of the information I have as a starting point.

Here is a link to an IRS publication that answers some of your questions around the move:
http://www.irs.gov/publications/p570/ch01.html

I do believe you have to pay federal taxes on Social Security income and IRA withdrawals.

Even with Act 22 you would have to pay federal (and Puerto Rico) taxes on Traditional IRA withdrawals.  Act 22 is only applicable to capital gains realized in a non tax-deferred brokerage account while being a bona fide resident of Puerto Rico.  The broker does not have to be based in Puerto Rico.

David

I was hoping for a different answer but was prepared to pay Federal on both. The reason I was hoping not to is because I never heard of people in PR subsiding in SSN paying Federal. That may be because their income is too low or I do not know that many people. There was also something I read about the tax depending on where you live when you receive the benefits. I was also hoping to put the tax payments in PR instead of the white house pockets.
I was nice to dream
Thanks a lot, what you found is very close to what I also found.
Rey

I really had no plans to reply to this since I know nothing about taxes! The IRS states after 182 days you are considered a resident and Puerto Rico does not tax the Social Security Pension.  I have no idea about Act 22 or the IRA...best advice here is to contact a Professional.

Dora787 wrote:

I really had no plans to reply to this since I know nothing about taxes! The IRS states after 182 days you are considered a resident and Puerto Rico does not tax the Social Security Pension.  I have no idea about Act 22 or the IRA...best advice here is to contact a Professional.

That was my impression but I was not sure. Social Security will be a good chunk of my budget so not paying taxes on that portion will go a long way. To be on the safe side I was budgeting for 15% taxes on the SSN pension and IRA distributions, so it is likely I will be saving from paying tax on about 60% of my yearly income.

I plan to take a trip to PR in July or after, to talk to a CPA and some realtors.
Thanks, your response is greatly appreciated.
Rey.

Just to be clear, I did not say that the Puerto Rican government taxes Social Security income.  Honestly, I don't know if they do or they don't.  (I would think someone here would know the answer to this)

What I did say is that to the best of my knowledge, even bona fide residents of Puerto Rico have to pay FEDERAL taxes on Social Security income because that was the original question.

Anyway, it seems like at least at a high level, the question of how Social Security income is taxed in PR is straightforward enough that it shouldn't require individualized advice from a professional.

David

I believe it depends on how much other income you have coming in that will affect how much you pay taxes on Social Security.  People just subsiding on SS will most likely not pay much if any at all.  But retirement income such as IRA and Pension you will pay Federal taxes as it has not been taxed previously.  I don't know about PR taxes, though.

davidtx wrote:

Just to be clear, I did not say that the Puerto Rican government taxes Social Security income.  Honestly, I don't know if they do or they don't.  (I would think someone here would know the answer to this)

What I did say is that to the best of my knowledge, even bona fide residents of Puerto Rico have to pay FEDERAL taxes on Social Security income because that was the original question.

Anyway, it seems like at least at a high level, the question of how Social Security income is taxed in PR is straightforward enough that it shouldn't require individualized advice from a professional.

David

I guess I didn't word it right...When I said "Puerto Rico does not tax the Social Security Pension" I meant in Puerto Rico you do not pay any Taxes on the Social Security. I was referring to the Federal Gov. since that was the question and I never heard of anyone who paid taxes on Social Security in PR...I'm almost positive you are never required. Of course this is after being a resident 182 days and also moving your IRA etc. here. Either way like Nomad Lawyer said these are not simple answers and you should hire an CPA to help you with all the tax laws and the IRA.

Dora787 wrote:

davidtx wrote:

Just to be clear, I did not say that the Puerto Rican government taxes Social Security income.  Honestly, I don't know if they do or they don't.  (I would think someone here would know the answer to this)

What I did say is that to the best of my knowledge, even bona fide residents of Puerto Rico have to pay FEDERAL taxes on Social Security income because that was the original question.

Anyway, it seems like at least at a high level, the question of how Social Security income is taxed in PR is straightforward enough that it shouldn't require individualized advice from a professional.

David

I guess I didn't word it right...When I said "Puerto Rico does not tax the Social Security Pension" I meant in Puerto Rico you do not pay any Taxes on the Social Security. I was referring to the Federal Gov. since that was the question and I never heard of anyone who paid taxes on Social Security in PR...I'm almost positive you are never required. Of course this is after being a resident 182 days and also moving your IRA etc. here. Either way like Nomad Lawyer said these are not simple answers and you should hire an CPA to help you with all the tax laws and the IRA.

At my next trip to PR I will check with a CPA and let you all know.
Thanks

The tax situation is complicated but here are a couple of basics:

1 You have to spend 183 days (over 1/2 year) to become a PR resident and  subject to PR tax.  Otherwise you are subject to your home state tax.  The first year after moving, it will depend on how many days you spent in PR.
2.  When you become a PR resident, you are no longer subject to your former state's  tax.
3.  When a PR resident you pay PR income tax on your Income from PR sources and US taxes from US sources.
4.  Your pension if from a US company is subject to Fed tax.  Same for your pension.  Moving accounts to PR does not move them to PR taxes if the company is based in the US.  You would have to invest in PR companies to escape US tax.
5. Social Security income is not taxes in the US or PR.

Great information, wpotvin.  But I would also, have to add that social security is taxed above a certain amount of income.  So if pensions and investment income is higher, then a portion of ss could be taxed.  I agree, with the rest of your post.

Yes, if you take early payments and are under your SS retirement before age 65 - 67 depending on when you were born, your SS payments are reduced until you hit that age.  The amount of the reduction is made up for by higher payments after your regular retirement, so its not technically a tax.  You get the money back - if you live long enough.

Schuttzie wrote:

Great information, wpotvin.  But I would also, have to add that social security is taxed above a certain amount of income.  So if pensions and investment income is higher, then a portion of ss could be taxed.  I agree, with the rest of your post.

That sounds good, thanks