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Circular Letter 16-02 (CL 16-02), issued on February 17, 2016, by Puerto Rico's Treasury Department (PRTD), provides guidance on the mandatory electronic filing requirement for 2015 individual income tax returns.

Electronic filing requirement

The following individuals must file their individual income tax returns electronically:

— Single or married residents of Puerto Rico whose gross income for the tax year, net of exemptions, exceeds $5,000

— Single or married nonresidents of Puerto Rico who are citizens of the United States and whose gross income from Puerto Rico sources for the tax year, net of exemptions, exceeds $5,000 (unless the tax has been totally paid at source)

— Nonresident aliens who during the tax year had taxable gross income from Puerto Rico sources (unless the tax has been totally paid at source)

— Individuals who during the tax year had net income subject to an alternate basic tax of $150,000 or more

The PRTD will not accept the filing of paper returns unless the taxpayer qualifies for one of the exceptions to the electronic filing detailed below. The PRTD will treat paper filers who should have filed electronically as not having filed and subject to late-filing penalties.

Individuals who qualify under one of the electronic filing exceptions must file a Form 483.2, Exception to Electronic Filing of the Individual Income Tax Return, with their paper return. The PRTD will not accept paper returns without a Form 483.2.

Individuals must file an amended return electronically if they filed their original return electronically. Likewise, individuals who filed their original return on paper must file an amended return on paper and attach Form 483.2.

Exceptions to electronic filing requirement

The following taxpayers are exempt from the electronic filing requirement and must file on paper:

1. Individuals who are partners or shareholders of a pass-through entity whose tax year ends before December 31, 2015

2. Nonresident individuals of Puerto Rico who only sell real property in Puerto Rico after December 31, 2015, and are requesting the refund of the amount withheld under Section 1962.08(g)(3) of the Puerto Rico Internal Revenue Code of 2011, as amended (PR Code)

3. Individuals claiming a deduction for an initial investment in a private capital fund or a Puerto Rico private equity fund, under Act 185-2014

4. Individuals with pension income reported on Form 1099-R of the US IRS and subject to the exemption of $11,000 or $15,000

5. Individuals reporting exempt income under a Special Agreement for the Creation of Young Businesses issued by the Puerto Rico Trade and Export Company under Act 135-2014, as amended

6. Individuals claiming certain tax credits on Schedule B, Part II and IV (except paragraph 14, Part II of Schedule B)

7. Individuals claiming the American Opportunity Credit

8. Individuals who are subject to a reduced tax rate in accordance with a Special Agreement for the Creation of Jobs issued by the Puerto Rico Trade and Export Company under Act 1-2013, as amended

9. Individuals who are transferred outside Puerto Rico during a warlike conflict and receive income for active military service in a "combat zone" for a tax year beginning after December 31, 2014

10. Individuals claiming a deduction for contributions to governmental pension or retirement systems in excess of the contributions reported on Form 499R-2/W-2PR or Form 499R-2c/W-2cPR

11. Individuals who are required to use Form AS 2668.1, Back Pay, to determine their corresponding income tax

12. Individuals who must file Audited Financial Statements issued by a CPA in Puerto Rico because they have aggregate gross income on Schedules K, L, M and N in excess of $3 million during the tax year

13. Foreign individuals who are not residents of Puerto Rico with income from a trade or business in Puerto Rico under Section 1035.05 of the PR Code

14. Individuals who file a return for the first time and receive a notification while trying to electronically file because of an error with the social security number

15. Individuals claiming a foreign tax credit for taxes paid to foreign countries, the United States, its territories and possessions, according to the PR Code

16. Individuals who are filing a return under Option 94, as provided in Section 1021.04 of the PR Code

17. Individuals deceased during the year or surviving spouse who files another income tax return for the same tax year

Compliance with the electronic filing requirement

Individuals may complete a return through a program or certified application listed on the PRTD's website. Individuals may access the list by selecting the tab labeled, "PRTD Certified Providers for Electronic Filing." Payment may be made at the same time the return is filed or individuals may authorize a debit from a bank account no later than April 15, 2016.

Filing paper returns

All individuals eligible to file paper income tax returns may file their returns and Form 483.2 at the following locations:

— In person, at the PRTD's headquarters, Building Intendente Ramirez, 10 Covadonga Street, San Juan or by mail at: Treasury Department, PO Box 9022501, San Juan, PR 00902-2501

— Orientation and Return Preparation Centers located at the following commercial centers: Plaza Las Americas, Plaza Carolina, Beltz Outlets in Canovanas, Ponce Mall and Mayagüez Mall (Centers)

— Taxpayer Service Centers located in San Juan, Ponce, Mayagüez and Barceloneta

— Collection Bureau Offices

Automatic extensions

The PRTD will only accept the request for automatic extension of time to file the income tax returns (automatic extension) electronically. Automatic extensions filed on paper will be accepted only if there was a social security number error at the time of filing; the automatic extension must be accompanied by Form 483.2. The Centers will be available to complete and electronically file the automatic extension for employed and retired individuals. The payment for the automatic extension can be made through direct debit or credit card. For direct debit payments, the taxpayer must present a check to confirm the checking account and photo id. To pay in cash, personal check, ATM, Visa or Master Card, the taxpayer must visit any of the collection bureaus; these payment methods are not available at the Centers.

Implications

Individuals who have been filing automatic extension requests or returns in paper form should take notice of these changes to ensure compliance with their filing obligations.

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