Monday, June 1, 2020

Puerto Rico Treasury: More Covid-19 Disaster Relief for Taxpayers, Business Owners

By on March 30, 2020

Puerto Rico Treasury Department (Juan J. Rodríguez / CB)

Self-employed Urged to Apply for $500 Payment; Tax-free Employer Aid to Workers, IRA Disbursements Authorized

SAN JUAN – Starting Monday, self-employed individuals in Puerto Rico may apply for an economic incentive of $500 by filling out a form on the island Treasury’s online internal revenue system (SURI by its Spanish acronym).

Puerto Rico Treasury Secretary Francisco Parés Alicea also announced that qualifying aid payments employers make to their workers will not be taxed, and that disbursements from retirement plans and individual retirement accounts (IRAs) are being authorized due to the emergency measures taken by the government to curb the spread of the coronavirus disease (COVID-19).

The $500 cash incentive, which has an application deadline of May 1, will only be sent to individuals who are self-employed and have registered as business owners on SURI with a Merchant Registration Certificate that was active as of March 15, Parés said, adding that eligible individuals must enter the bank routing number and account where the $500 will be deposited.

The incentive is part of the Gov. Wanda Vázquez administration’s economic rescue plan, announced last week to address the expected devastation to the island’s economy by the lockdown and curfew she ordered to prevent further spread of the novel coronavirus.

Parés said the disbursement will only be made through direct deposit, as stipulated in Internal Revenue Circular Letter 20-21, to ensure those eligible get the cash incentive quickly and to reduce fraud risks.

To apply for this cash incentive, self-employed individuals must access their SURI account and in the “Alertas” (Alerts) section select “Incentivo Económico” (Economic Incentive). Then they must enter the required banking information and submit.

In the case of self-employed individuals registered as business owners in SURI but whose Merchant Registration Certificate was expired as of March 15, they will have the option of applying for the cash incentive during the allotted time, provided they update the certificate and confirm that they have not ceased operating, among other considerations in Internal Revenue Circular Letter 20-21, Parés said.

Tax-free employer aid, IRA disbursements authorized

Parés also announced that qualified aid payments employers make to their workers will not be taxed, and that disbursements from retirement plans and IRAs are being authorized due to the Covid-19 emergency. He said Internal Revenue circular letters 20-08 and 20-09, which were issued in February and implemented these measures to aid victims of the January earthquakes, are being extended to the current emergency.

For the purposes of qualified payments established in Internal Revenue Circular Letter 20-09, the agency approved Internal Revenue Circular Letter 20-22, which exempts employers from income taxes on qualified payments to employees to help them overcome the effects of the governor’s Covid-19 disaster declaration, which includes the shutdown of nonessential businesses to curb the spread of the disease.

Business owners will be able to make qualified payments to employees and independent contractors due to the novel coronavirus emergency declaration, Parés said, adding that this also applies to payments or remuneration to non-exempt employees who have not worked during the curfew/lockdown. These payments must be done within the eligible period, Feb. 1 to April 30, and cannot exceed $2,000 a month and $4,000 during the period.

Concerning special distributions for disaster relief in Internal Revenue Circular Letter 20-09, Parés informed employers, trustees, participants and beneficiaries of retirement plans and IRA accounts that any expense incurred as a consequence of the Covid-19 emergency, including losses resulting from the curfew/lockdown closures, are considered eligible expenses, according to Internal Revenue Circular Letter 20-23.

“A distribution that complies with the requisites established in Internal Revenue Circular Letter 20-09 and that is used for expenses related to the emergency will be considered a Special Distribution for Disaster,” the Treasury chief said in a statement. “This determination… will apply to residents of all of the 78 municipalities of Puerto Rico and must be done in the eligible period.”

New tax filing and payment deadlines

In addition, Parés announced the issuance of administrative determinations 20-09 and 20-10, establishing new deadlines for filing of tax returns and payment of taxes, in addition to measures to speed up the flow of cash to taxpayers and business owners affected by the Covid-19 emergency.   

“The economic changes and health problems that we face clearly anticipate difficulties to comply with certain responsibilities, including making payments for taxes…,” he said in a statement. “For this reason, we are postponing certain deadlines….”

Parés said no interest, surcharges and penalties will be applied to tax return filings, payments and deposits made no later than the following deadlines:

  • Sales and Use Tax (SUT, or IVU by its Spanish acronym): The deadline for filing of returns and corresponding payments for the months of February, March, April and May will be April 20, May 20, June 22 and July 20, respectively. This includes SUT by-weekly returns.
  • Import Tax Monthly Return: The deadline for filing of returns and corresponding payment for the months of March, April and May will be May 10, June 10 and July 10, respectively.
  • Income tax returns: Returns whose original deadline or duly requested extension deadline is March 15 will have a new deadline of June 15. These include all returns with postponed deadlines as of March 16.
    Returns whose original deadline or duly requested extension deadline is April 15 will have a new deadline of July 15. Returns whose original deadline or duly requested extension deadline is May 15 or June 15 will have a new deadline of July 15.
  • Informative declarations: The new deadline for filing of informative declarations will be on May 15 free of penalties.
  • Other returns, documentation and tax payments: No interest, surcharges and penalties will be charged as long as they are submitted before the following deadlines, with certain exceptions: Those with original deadlines in March and April should be submitted no later than the same deadline day in June. Those with original deadlines in May and June should be submitted no later than the same deadline day in July.
  • Internal revenue bonds and licenses: Those with original deadlines between March 15 and April 30 will have an automatic deadline extension until May 31.

Measures to facilitate cash flow

Parés is reportedly drawing plans to be submitted to U.S. Treasury officials and the Financial Oversight & Management Board (FOMB) to use Treasury money to speed up Covid-19 aid checks to local residents before Puerto Rico receives the estimated $1.5 billion in federal funding to reimburse these payments. He said he believes his agency is better prepared to process those checks and that it would take the U.S. Treasury longer to issue such payments directly to island residents.

Parés said his agency could issue the checks before the three-week goal mentioned by U.S. Treasury Secretary Steve Mnuchin on Sunday. The checks are part of a $2.2 trillion rescue bill passed overwhelmingly by Congress and signed by President Trump on Friday to offset the devastating economic effects of the coronavirus. It includes $1,200 checks to taxpayers who earn less than $75,000 a year, plus another $500 for each dependent.

Locally, Parés said that Administrative Determination 20-10 establishes the following relief measures to facilitate cash flow for taxpayers and business owners.   

  • Requisite for estimated payment for individuals and corporations: No penalties will be imposed if first and second installment payments are made at the date prescribed in the Internal Revenue Code.
  • Withholding at the source on payments for services rendered: All withholding agents will not have to make income tax withholdings on payments for services rendered during April, May and June. Taxpayers who filed for the optional tax for 2020 and obtained a Partial Relief Certificate must pay no later than the last installment deadline for estimated tax for tax year 2020. The receptor of the payments may request the withholding agent to continue withholding income tax at the source.
  • Required payment of SUT in the import and purchase of taxable items for resale: Treasury issued a temporary exemption period, from April 6 to June 30, for importing and or acquiring taxable items for resale free of SUT. Eligible business owners and resellers must have an active Reseller Certificate on the date this determination was issued. All resellers who have an active and current Reseller Certificate will automatically receive a Temporary Exemption Certificate on their SURI account.
  • Application of refunds and excess payments to other taxes: Treasury will allow all taxpayers with payments in excess and who have not requested to have them applied to future tax debt, to do so.
  • Tax year 2019 income tax payment plan agreements: Any taxpayer who requests an instalment plan must commit to paying the total amount no later than March 31, 2021. As soon as the taxpayer pays the debt, Treasury will proceed to eliminate corresponding interest, surcharges and penalties.

Treasury’s circular letters and directives can be accessed at the department’s website, www.hacienda.pr.gov, in the Publications, Internal Revenue and Tax Policy sections. For more information, taxpayers may use their SURI accounts to send messages or questions, or do so via email (redes@hacienda.pr.gov), Twitter or Facebook: @DptoHacienda. The agency will set up a hot line starting Tuesday: (787) 945-5005. 

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