We have sent inquiries to the Dept of Treasury in San Juan. We called that number also several months ago and were instructed to send inquiries via mail. Since their response time seems elongated, we decided to chase other options and opinions while we wait. It's always good to have another opinion or set of eyes on a situation.
I'm kind of surprised that being in Atlanta that
PR hasn't come up before. With multi-jurisdictional companies like Coca-Cola and Georgia Pacific in the area, I had hoped our situation had risen before.
Here's what we have been told via other sites so far. If you subcontract a US Citizen living in
PR, you not only have to give him a 1099Misc(if qualified, sole proprietor) for US reporting, but you also have to deduct 7% withholding from the payment and submit it to
PR. I'm sure you can see the twist here. If we report the full amount via the 1099Misc to the IRS and deduct the 7% (which has obviously would have no box for reporting on the 1099 form) then the taxpayer is basically being taxed for money not received or double taxed as it were. As a resident of
PR, he falls under their tax umbrella also even if he is not a citizen of
PR. We do understand that
PR has some allowances for this. We are trying to cover all the bases and get as many opinions as possible.
So you can see where we stand. I've been interacting directly with the IRS for many years and have served as a testing monitor for several of their projects(Tin Matching in particular since 2002 prototype testing began.) This Puerto Rico issue has really just emerged as we moved some business there. Hopefully by the end of 2005, we will get it all under control. I'm meeting with a Compliance group in June and I've already asked that
PR be included as a forum topic.
This is a great site. I've jumped around to lots of forums of interest. Keep up the good work.
PRC
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