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W2-PR claiming foreign tax credit and social security taxes

I received a W2 PR from my employer for a year where I will not be a bona fide resident of Puerto Rico.

  • I've paid local PR tax on this income, in addition to Medicare and Social Security taxes
  • I also have foreign income from 1099-DIV

Please let me know if this is correct:

  • I should not enter the PR income as a W2 income
  • I should enter it under Wages & Income --> Less common income --> Foreign Earned Income and Exclusion --> a statement from my foreign employer (NOT a "regular Form W-2 from my employer") --> no I don't want to exclude my foreign income
  • Under Deductions and credits --> Estimates and other taxes paid --> Foreign Taxes --> Form 1116 --> General Category Income (NOT Income re-sourced by treaty, since I have income from RIC on my 1099-DIV) --> Puerto Rico --> No I have foreign taxes paid on other income (including wages) --> HERE do I put just the taxes paid to Puerto Rico, or do I include the social security and medicare taxes as well?

Questions:

  1. Is this all I need to do in order to properly file my W2-PR as part of my return? I know I should use the taxes paid number from Hacienda before submitting my final form - but does my deduction get adjusted in anyway?
  2. Will the PR income be excluded from my state income taxes (i.e. if I'm a resident of NJ will I have to pay NJ taxes on my foreign income from PR?)

Thank you.

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1 Reply
AmyC
Expert Alumni

W2-PR claiming foreign tax credit and social security taxes

1. Great job! The PR income and taxes would be entered as you described and the IRS can follow and understand. Your social security and Medicare taxes - those were withheld by your employer since the are US based if I recall correctly. Those numbers go to the respective agencies and you don't need to add them to your return.

2. You said you are not PR resident but I don't think you are returning to NJ either. Here are some things states look at when determining residency from The Tax Book:

  • Registering to vote and voting in the new state.
  • Purchasing residential property.
  • Titling and registering vehicles.
  • Paying state income tax to another state
  • Notifying the state of previous legal residence/domicile of the change in state of legal residence/domicile.
  • Preparing a last will and testament which indicates the new state of legal residence/domicile

As you can see, it is just a question of your intention to return and how you are living. 

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