Head to April 15 Confidently and Securely

By: Frances Pérez Mayo, Senior Private Banker at Popular One

Answering questions about your life stages will allow you to analyze your tax plan in preparation for filing tax returns on April 15. Also, besides the income tax return, there are other tax returns you may need to file depending on your situation. Here, we explain which are they and what documents you will need to file them.

Planning is key to reaching your goals. Creating an organized work plan can make the difference when achieving a personal or professional goal in the short or long term.

Together with your financial team, it is vital that you get organized in time to maximize tax benefits. An essential strategy is to gather all applicable forms and additional documents that will allow you to file the income tax return on or before April 15.

Life is a process of constant change. The same applies to tax laws, which change and are amended, creating both complex situations and opportunities. Staying up to date on current laws and implementing new strategies based on law changes, amendments, or personal circumstances can be challenging.

Therefore, it is important to create an action plan that allows you to organize your concerns and ideas. Start by evaluating your living situation through key questions, such as:

• What stage of life are you in?
• What changes in your circumstances require you to sit down with your advisors and review your financial strategies?
• Do you have a team of advisors that you trust?
• Do you feel well cared for, and that the process and advice are effective?

As part of the analysis, you must also answer the following questions:

• Place of birth and residence
• Civil status: single (including widower), married or separated, among others that apply
• Type of income: wages, professional services, Social Security benefits, interest and investment dividends, among others
• Origin of income: Puerto Rico and the United States, among others
• Current business structure: are you taxed at the corporate or individual level?

The answers will allow you to have a clearer scenario. At each stage, it is important to sit down with your advisors and identify potential strategies you could implement to reduce tax payments in an orderly, legal, and ethical manner. You can also get better organized to save and accrue more liquid assets for retirement.

Life stage changes are warning signs. Below are some key words that merit analyzing your tax plan.

• Part-time vs. full-time vs. retired
• Single vs. married
• Children vs. no children
• Employed with salary vs. self-employed or professional services
• Maximizing retirement benefits provided by your employer vs. creating a retirement strategy while self-employed
• Renting a real estate property vs owner

In addition to the income tax return, other types of tax returns could apply depending on your particular circumstance:

1. Gift Tax Return: Form should be filed if you reside in Puerto Rico and transfer or donate an asset, freely and voluntarily, during your lifetime.

The Department of the Treasury of Puerto Rico requires the following documents when filing a Gift Tax Return:

• An Internal Revenue Stamp of $25. If you are a donor residing in Puerto Rico and a veteran of the U.S. Armed Forces, you must submit a copy of Form DD-214.
• Copy of the gift’s deed, if applicable.
• Certificate from the Municipal Revenue Collection Center (CRIM by its Spanish acronym) showing that the properties reported in the return do not owe property taxes as of the date the gift return is filed. This certification is requested under the property’s registry number.
• Certificate from the Internal Revenue Office indicating that you do not owe other taxes, such as income tax, excise taxes, or the Sales and Use Tax (IVU by its Spanish acronym).
• The donor needs to be current with his/her Income tax return filings. If the donor was not required to file a return during the last 5 years, they must fill out the following form: Certification of Reasons for which the Taxpayer is Not Required by Law to File the Individual Income Tax Return (Form AS 2781.1).
• If the donor was not residing in Puerto Rico when making the donation, they must submit a copy of the appraisal report that shows the value of the property at the time of gifting it. If the donor does not have a Social Security number, they must provide a certification issued by the Social Security Administration.

2. Estate Tax Return: The administrator or whoever has inherited a property must file this return no later than 270 days after the death of their family member.

It must also be filed for every deceased Puerto Rico resident or for every non-resident that at the time of death owned a property on the island.

This return lists the assets or rights over personal or real estate property, tangible or intangible, no matter where they are located. Assets must be listed in the following order:

1. real estate
2. stocks and bonds
3. mortgages, notes, and cash in banks
4. life insurance policies
5. other miscellaneous property

We are here to assist you

The most important thing is compliance with tax returns filing when certain rules apply. Failure to do so could result in substantial charges. Filing dates, penalties, and viable strategies to implement are important points that should not be underestimated. Also, remember to consult with your tax advisor if you donate any assets in the United States.

At Popular One¹ our team of professionals is ready to assist you during the design and implementation of your financial plan². Consulting with your tax and legal advisor is essential during implementation. Contact your Private Banker today. Call us at 787-281-7272 or email popularone@popular.com.