17 Sep How long do I have to keep filing federal tax returns?

Q. I moved to Puerto Rico eight years ago. I receive Social Security and a pension from New Jersey. I will be 66 soon. How long do I have to keep filing federal taxes?
— Tired of filing

A. Let’s start with some basic U.S. income tax rules.

U.S. citizens are subject to paying taxes on their income earned anywhere in the world, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.

However, he said, U.S. citizens who reside in Puerto Rico full-time are exempt from filing U.S. federal income taxes as long as all of their income is from Puerto Rico sources.

So the two requirements are that you are a bona fide resident of Puerto Rico for the entire tax year and your only income is from Puerto Rico sources.

“So the reader meets the first requirement but unfortunately does not meet the second requirement,” Maye said. “The reader’s Social Security and State of New Jersey pension do not qualify as Puerto Rico sources of income.”

Maye said Social Security benefits by definition are considered U.S. source income. Also, Maye said, the New Jersey pension is also considered U.S. source income because it was earned in New Jersey.

“As a result, the reader will still need to file a federal income tax return as long as their income is above the U.S. filing threshold based on their filing status just like any other U.S. citizen,” Maye said.

There are cases where some taxpayers may not need to file a tax return, but it depends on several factors.

“For 2019, the income cutoff where a taxpayer is not required to file a tax return is based upon their standard deduction,” Maye said. “The standard deduction is determined by their filing status and age.”

For 2019, those under age 65 the standard deductions are: $12,200 individual, $18,350 for head of household, and $24,400 for a married couple filing jointly. Taxpayers over the age of 65 are also entitled to an additional standard deduction of $1,300 a person. If a taxpayer is blind they are also entitled to an additional $1,300 for their standard deduction, he said.

For more information, taxpayers can consult IRS Publication 570, which discuss bona fide residents of U.S. “possessions,” such as Puerto Rico. Bona fide Puerto Rico residents who have both Puerto Rico and U.S. source income they should consult IRS Publication 1321. 

Finally, Maye said, it should be noted there are special rules for U.S. citizens in military service.

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This story was originally published Sept. 17, 2019.

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