IRS Has Tax Refunds for Puerto Ricans

The U.S. Internal Revenue Service recently disclosed here that tax refund checks for 2003 it tried to mail to over 700 Puerto Ricans have been returned. The refunds demonstrate that residents of Puerto Rico are not exempt from federal income tax requirements as claimed by the territory's "commonwealth" political party and is often reported. The federal government has full power to tax Commonwealth residents and has exercised the power several times. It has not taxed residents on their Puerto Rican income but does tax them on their income from the States and the District of Columbia. Refunds can come from that taxation of income from the States (and DC). Bequests are treated similarly: no taxation of estate assets in Puerto Rico but taxation of assets in the States. Thresholds of amounts of income and estate assets that must be reached before tax is due mean that most residents of Puerto Rico with income from the States and most Puerto Rican estates with assets in the States do not have taxes to pay, however. [more]