TAXES 17-20, Puerto Rico Income Tax Withholding

Published: June 14, 2017
Effective: Pay Period 06, 2017

Summary

The income tax withholding formula for Puerto Rico has changed. The previous exemption from tax withholding for all employees whose estimated annual wages do not exceed $20,000 is being eliminated. The full Puerto Rico tax formula will be applied for all residents and nonresidents to determine the appropriate annual taxable wages.

No action on the part of the employee or the personnel office is necessary.

Tax Formula

State Abbreviation:

PR

State Tax Withholding State Code:

RQ

Acceptable Exemption Form:

499R

Basis for Withholding:

State Exemptions

Acceptable Exemption Data:

S/M/N/B/C, Number of Dependents, Allowance Based on Deductions, Personal Exemption

TSP Deferred:

Yes

Special Coding:

Determine the Total Number of Allowances field as follows:

First Position - Enter the employee's marital status as indicated in Section A, Personal Exemption, of the exemption certificate. Valid entries are:

Marital Status Code

Description

S

Individual - Claiming "Complete" Personal Exemption or "None"

M

Married - Claiming "Complete" Personal Exemption or "None"

N

Claiming "Half" Personal Exemption

B

Married, Filing Separately - Claiming "Half or Complete" Personal Exemption or "None"

C

Married, Filing Jointly - Claiming "Half or Complete" Personal Exemption "Optional Computation of Tax"

 

 

Note: If one of the filing statuses above is not claimed, the filing status will default to "S."

 

Second and Third Position - Enter the total number of complete dependents claimed in Section B of Form 499R.

 

Note: When entering the total number of dependents in Section B of Form 499R, if the employee does not claim one of the previously mentioned Marital Statuses, they need claim one (1) for each complete exemption.
For each Joint exemption, the employee would claim one-half (1/2) exemption (e.g., two (2) complete exemptions and two (2) Joint exemptions would be entered as three (3) exemptions. The exemption allowance would be $2,500 each for the three (3) exemptions). However, the employee would have to round up or down the number of Joint exemptions. Three (3) Joint exemptions would need to be rounded down to one (1) exemption or rounded up to two (2) exemptions.
If an employee claims Marital Status Code B or C, all dependent exemptions will be applied as $1,250.

 

Determine the Additional Exemptions Claimed field as follows:

First and Second Positions - Enter the total number of allowances based on deductions (Section C, item 4 of Form 499R). If the employee indicated the optional method, enter the number of allowances. If less than 10, precede with a 0.

 

Determine the Personal Exemptions Claimed field as follows:

Enter 0 in this field if the employee marked none in Section A, Personal Exemptions, of the exemption form.

Enter 1 if the employee marked "Complete" or "Half."

Note: Only Marital Status Code N can claim "Half" of a personal exemption.

 

Determine the Veteran/Special Deduction field as follows:

Enter 0 in this field if the employee claims no Veteran or Special Deduction.

Enter 1 in this field if the employee claims additional Veterans Personal Exemption only.

Enter 2 in this field if the employee claims Special Deduction only.

Enter 3 in this field if the employee claims additional Veterans Personal Exemption and Special Deduction.

Withholding Formula (Residents) (Effective Pay Period 06, 2017)

  1. Subtract the nontaxable biweekly TSP contribution (includes the biweekly TSP catch-up contribution) from the gross biweekly wages.
  2. Subtract cost-of-living allowance (COLA) from the adjusted gross biweekly wages.
  3. Add the taxable biweekly fringe benefits (i.e., taxable life insurance) to the amount computed in step 2 to obtain the adjusted gross biweekly wages.
  4. Multiply the adjusted gross biweekly wages times 26 to obtain the annual wages.

    Note: This authority does not allow employees to claim exemption from withholding. If the employee has claimed one or more exemptions, calculate tax using the steps below.

  5. Multiply the number of Allowances Based on Deductions claimed by the employee by $500 and subtract from the employee's annualized gross pay.
  6. If the employee claimed the taxpayer Personal Exemption, subtract the appropriate Personal Exemption amount (found in the table below) from the amount calculated in step 5.
  7. Subtract the appropriate Personal Exemption amount (found in the table below) from the amount calculated in step 6.

    Marital Status Code

    Marital Status

    Personal Exemption Claimed

    Amount of Deduction

    S

    INDIVIDUAL

    Complete

    $3,500

    M

    MARRIED

    Complete

    $7,000

    N

    MARRIED

    Half

    $3,500

    B

    MARRIED, Filing Separately

    Half or Complete

    $3,500

    C

    MARRIED, Filing Jointly Claiming "Optional Computation of Tax"

    Half or Complete

    $3,500
  8. If the employee has claimed the Additional Veterans Personal Exemption, subtract $1,500 from the amount calculated in step 7.
  9. If the employee is claiming MARRIED and has elected the Optional Computation of Tax, multiply the total number of dependents claimed by $1,250 each. If the employee is claiming MARRIED FILING SEPARATELY, multiply the total number of dependents claimed by $1,250 each. Otherwise, multiply the number of Complete Exemption dependents by $2,500 each. (Two joint exemptions equal one complete exemption). Subtract the result from the amount calculated in step 8 to arrive at annualized taxable wages.
  10. Using the following table, apply the appropriate formula to the annualized taxable wages:

    Taxable Wages

    Amount of Tax

    Over $0 but not over $9,000

    $0.00

    Over $9,000 but not over $25,000

    7% minus $630

    Over $25,000 but not over $41,500

    14% minus $2,380

    Over $41,500 but not over $61,500

    25% minus $6,945

    Over $61,500

    33% minus $11,865
  11. Divide the annual Puerto Rico tax withholding calculated in step 10 by 26 to obtain the biweekly Puerto Rico income tax withholding.

Withholding Formula (Nonresidents) (Effective Pay Period 06, 2017)

  1. Subtract the nontaxable biweekly TSP contribution (includes the biweekly TSP catch-up contribution) from the gross biweekly wages.
  2. Subtract COLA from the adjusted gross biweekly wages.
  3. Add the taxable biweekly fringe benefits (i.e., taxable life insurance) to the amount computed in step 2 to obtain the adjusted gross biweekly wages.
  4. Multiply the adjusted gross biweekly wages times 26 to obtain the annual wages.
  5. Apply the annual wages to the following guidelines to compute the annual Puerto Rico income tax withholding amount:

    Compute the Commonwealth of Puerto Rico Tax Withholding For:

    By Multiplying the Gross Amount Wages By:

    U.S. Citizen

    20%

    Non-U.S. Citizen

    29%
  6. Divide the annual Puerto Rico tax withholding calculated in step 6 by 26 to obtain the biweekly Puerto Rico income tax withholding.

Resource

To view the updated tax formula, go to the HR and Payroll Clients page from the MyNFC drop-down menu on the National Finance Center (NFC) homepage. Select the Publications tab and select U.S. Income Tax Formulas from the Publications menu to launch the tax map. Select the desired State from the map provided for the formula.

Inquiries

For questions about NFC processing, authorized Servicing Personnel Office representatives should contact the NFC Contact Center at 1-855-NFC-4GOV (1-855-632-4468) or via the Internet using the Requester Console.