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Hurricane Relief – Filing and Payment extensions

Modification of Automatic Extension’s Period and Application Procedure for the Condonation of Applicable Surcharges and Penalties due to the non-compliance of the Estimated Tax Payment.

The Puerto Rico Treasury Department (“PRTD”) has granted all taxpayers that file an Automatic Extension, a period of 6 months, instead of the usual 3 months, to file their return. This will apply to taxpayers with a calendar or economic year end. The 6 months term will be applied automatically, as long as the taxpayer files the Request for Automatic Extension no later than the deadline established for the filing of the Income Tax Return.

In the case of individuals and estates, due to the 6-month Automatic Extension, the PRTD will not accept applications for an additional extension.

At the same time, in the case of corporations and limited liability companies, the 6-months period of the Automatic Extension will apply only to the extent that the taxpayer files the Return electronically. Therefore, only those Regular Corporations that file the Return “on paper” due to the 4 exceptions to the electronic filing established in Circular Letter 18-03 will have the right to the 6-months extension. Therefore, Regular Corporations that do not comply with these requirements will maintain the “normal” 3-months period of the Automatic Extension, if requested. As for pass-through entities, those with taxable year ending December 31 (natural year), that filed a Request for Automatic Extension for the informative return originally due on March 15, 2018, will automatically have until Monday, September 17, 2018 to file said Informative Return on Income of Pass-through Entities and the Informative Declaration of Pass-through Entities for tax year 2017.

Every taxpayer who, upon filing the Return on the original due date does not submit the total payment of the tax, will be subject to the payment of interest and surcharges for late payment. However, in the case of the 2017 Returns, those taxpayers who filed an Automatic Extension may request the abatement of applicable penalties and surcharges for late payment if they meet the following requirements:

  • File an Automatic Extension no later than the due date of the Return.
  • File the Return no later than 6 months from the date established (extended date).
  • Submit together with the return the total payment of the tax owed, including accumulated interests.

In order to request the above-mentioned abatement, taxpayers must also include, together with the return, an attachment in which they express the reasons why it was not possible to comply with the total payment of the tax owed on the original due date. In the case of individuals and corporations filing their return electronically, said attachment must also be submitted electronically together with the Return. The PRTD did not mention how the attachment would be filed together with their return.

The PRTD also confirmed that those taxpayers who pay their tax liability in two installments, must submit the second payment on or before October 17, 2018.

The PRTD also established an abatement process for the 10% penalty for non-payment of the estimated tax. For tax year 2017, if the taxpayer complies with all the following requirements, he may request the abatement:

  • Have complied with the first two installments of the estimated tax of the taxable year.
  • Pay the total amount owed for the taxable year 2017 no later than the due date of the 2017 Return, without including extensions.
  • The taxpayer must calculate the penalty for estimated taxes on Schedule T of the return.

To request the abatement of the penalty for non-payment of the estimated tax, the taxpayer must send an email to: [email protected] or go to any PRTD office with the following documents:

  • Copy of the 2017 Return filed.
  • A letter requesting the condonation of the penalty imposed by Section 6041.09 or 6041.10 of the Code. The letter must state that the taxpayer complies with all the requirements herein discussed.

About the Author

Carrion Sanchez LLC
Carrion Sanchez LLC

Carrión Sánchez, LLC is a highly dynamic legal firm specialized in tax and corporate matters for high-net-worth individuals and businesses within and without Puerto Rico. Contact Us at [email protected]