Form 1040-PR: A Breakdown of the Filing Instructions

Form 1040-PR was a U.S. tax form used by bona fide residents of Puerto Rico to report self-employment income. Filing this form allowed individuals to calculate and pay self-employment tax, which contributes to their Social Security and Medicare coverage. It also allowed them to claim certain tax credits without filing the more comprehensive U.S. Form 1040.

The IRS has discontinued Form 1040-PR for tax years 2023 and forward. Residents of Puerto Rico who previously used it must now file Form 1040-SS, U.S. Self-Employment Tax Return. This change consolidates reporting for self-employed individuals in U.S. territories, and Form 1040-SS serves the same purposes as the old 1040-PR.

Filing Requirements for Form 1040-SS

The obligation to file Form 1040-SS is triggered by specific income thresholds for bona fide residents of Puerto Rico. An individual must file Form 1040-SS if they have net earnings from self-employment of $400 or more. This requirement also applies if a person had church employee income of $108.28 or more.

A condition for using Form 1040-SS is that the filer does not have a separate requirement to file a U.S. Form 1040. A bona fide resident of Puerto Rico only files a U.S. 1040 if they have income from sources outside of Puerto Rico that is taxable in the U.S. For individuals whose only income is from self-employment within Puerto Rico, Form 1040-SS is the correct document.

To be considered a bona fide resident of Puerto Rico, an individual must meet several IRS tests. These tests involve being present in Puerto Rico for a large part of the year, not having a tax home elsewhere, and not having a closer connection to the U.S. or another country. Meeting these residency requirements is a prerequisite for using Form 1040-SS.

Required Information for Form 1040-SS

Personal Information

Before beginning Form 1040-SS, you must gather personal data for yourself, your spouse if filing jointly, and any dependents. This includes the full legal name and Social Security Number (SSN) for every individual listed on the return. A current mailing address in Puerto Rico is also necessary.

Self-Employment Income and Expenses

Calculating your net earnings from self-employment requires keeping good records throughout the year. You will need to compile all records of gross income your business received, including documents such as sales slips, bank deposit records, and Forms 1099-NEC or 1099-K. You also need records for all ordinary and necessary business expenses, such as costs for supplies, rent, utilities, business travel, and professional services.

Dependent Information for Credits

If you plan to claim tax credits like the Additional Child Tax Credit (ACTC), you must have specific information for each qualifying child. For each dependent, you will need their full name, SSN, and relationship to you. You will also need documentation to prove their age and that they lived with you in Puerto Rico for more than half of the year. This information is used to complete Schedule 8812, which must be attached to your Form 1040-SS.

Guide to Completing Form 1040-SS

Part I – Self-Employment Tax

The first part of Form 1040-SS is for calculating your self-employment tax. You begin by reporting your net profit or loss from your business, which is your gross income minus your total business expenses. The form guides you to multiply your net earnings by 92.35% to find the portion subject to self-employment tax.

Once you have the taxable amount, you apply the self-employment tax rates. The tax is composed of a 12.4% Social Security tax and a 2.9% Medicare tax, for a combined rate of 15.3%. The Social Security portion applies up to an annual income limit, while the Medicare portion applies to all of your net earnings.

Part II – Tax Credits for Residents of Puerto Rico

This section of Form 1040-SS allows you to claim refundable credits, which can result in a payment to you even if you owe no tax. The main credit available to Puerto Rico residents on this form is the Additional Child Tax Credit (ACTC). To claim this, you must first complete and attach Schedule 8812, Credits for Qualifying Children and Other Dependents. The result from Schedule 8812 is then entered on the appropriate line in Part II of Form 1040-SS.

Schedules

In certain situations, you may need to attach other schedules to your Form 1040-SS. For instance, if you employ someone to perform domestic work in your home, you may be required to pay federal employment taxes. These taxes are calculated and reported on Schedule H (Form 1040), Household Employment Taxes, which you would then attach to your Form 1040-SS.

Filing and Payment Procedures

Submitting the Form

Once you have completed Form 1040-SS and any required schedules, you must file it with the IRS by the April 15 deadline. If enclosing a check or money order, mail your return to: Internal Revenue Service, P.O. Box 1303, Charlotte, NC 28201-1303. If you are not enclosing a payment, mail the form to: Department of the Treasury, Internal Revenue Service, Austin, TX 73301-0215.

Making a Payment

If you owe tax, you must pay by the filing deadline to avoid potential penalties and interest. When mailing a payment, make your check or money order payable to the “U.S. Treasury.” Write your name, address, SSN, the tax year, and “Form 1040-SS” on the front of the payment, but do not staple or paperclip it to your return. For electronic options, you can pay for free from a bank account using IRS Direct Pay, or use a debit card, credit card, or digital wallet via a third-party processor that may charge a fee.

After You File

After submitting your return, you can monitor its status. If you are due a refund from the Additional Child Tax Credit, check the status using the “Where’s My Refund?” tool on the IRS website or the IRS2Go mobile app. You will need your SSN, filing status, and the exact refund amount from your return. It can take several weeks for the IRS to process a mailed paper return.