Topic Number 903 - U.S. Employment Tax in Puerto Rico
Employers in Puerto Rico are subject to the taxes imposed by the Federal Insurance Contributions 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're required to withhold, report, and pay employment taxes to the United States on wages paid.
To file the various employment tax returns, you need an employer identification number (EIN). If you don't have an EIN, you may apply for one online. You may also use Form SS-4PR.pdf to apply for an EIN by fax or mail (use only one method for each entity so you don't receive more than one EIN for an entity). For more information about EINs, see Topic No. 755.
Social Security and Medicare
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.
Additional Medicare Tax
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, without regard to filing status. 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 and continue to withhold it each pay period until the end of the calendar year. There's no employer match for Additional Medicare Tax. For more information, see Questions and Answers for the Additional Medicare Tax.
Forms to File
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 Anexo H-PR (Formulario 1040-PR) 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, and amended Anexo H-PR (Formulario 1040-PR).
Form 941-PR - If you're 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, other compensation, and social security and Medicare taxes. You must file Form 941-PR if you expect to owe over $1000 total employment taxes for the tax year unless the IRS has notified you that you're required to file Form 944. 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 search "legal holidays" on IRS.gov.
Form 944 - If you're not an agricultural employer, you may be eligible to file annual Form 944 (or Form 944(SP), the Spanish version of Form 944). The Form 944 is filed annually and is due by January 31 after the end of the calendar year. Employers with an estimated employment tax liability of $1,000 or less for the entire calendar year are eligible to file an annual Form 944.
Employers aren't permitted to file Form 944 unless they indicated this on their Form SS-4.pdf, Application for Employer Identification Number, or 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 on Form 944. Employers required to file Form 944 and who want to file Forms 941-PR instead, must notify the IRS they're 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.
Tax Deposits - Most employers are required to deposit their FICA taxes before filing Form 941-PR. If you're 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 No. 758 or see the Form 941-PR Instructions. For more information about the Form 944.pdf, refer to Topic No. 758 or see the Form 944 Instructions. For information about the rules to make deposits, refer to Topic No. 757. If you have deposited all your tax on time, you have 10 additional days to file.
Household Employees - 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're required to withhold and pay these taxes, see Publication 926.pdf, Household Employer's Tax Guide. File Anexo H-PR (Formulario 1040-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, 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 aren't considered household employees.
Agricultural Employees - If you're 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're required to withhold and pay FICA taxes on your agricultural employees, refer to Publication 51, (Circular A), Agricultural Employer's Tax Guide. Form 943-PR is filed annually and is due by January 31 after the end of the calendar year. Most employers are required to deposit both the employer and employee portions of FICA taxes before the Form 943-PR is filed.
Federal Unemployment Taxes
If you're an employer in Puerto Rico, you might have to file a Federal Unemployment (FUTA) Tax Return. To see if you're required to pay FUTA taxes, refer to Publication 51 if you're an agricultural employer or Publication 926.pdf if you're a household employer. All other employers should refer to Publication 15 or Publication 179. With the exception of those who use Anexo H-PR (Formulario 1040-PR) 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 filed annually and is due by January 31 after the end of the calendar year. Most employers are required to deposit FUTA taxes. FUTA taxes aren't withheld from the employees' wages. The FUTA tax rate is 6.0%.
For tax assistance for residents of Puerto Rico, please see Topic No. 904.