Casting a stronger net
Treasury Dept. continues crackdown on unregistered vendors and people who don’t report their taxes
By Richard Gutiérrez
While money is hard-earned by many, it’s not always rightly earned. Some people don’t report the money they make to the island Treasury Department or the IRS. This is commonly known as tax fraud.
Puerto Rico is no stranger to tax fraud or tax evasion, but it seems that time will soon be running out for those who don’t report their earnings to the IRS and to those business owners who don’t register with the Treasury Department.
During a press conference on Thursday as a part of a series of inspection initiatives against tax evasion, Treasury Secretary Francisco Parés Alicea announced that the agency known locally as Hacienda will be sending more than 10,000 notifications to taxpayers who have failed to declare income totaling in the millions of dollars to Treasury, as well as to merchants who are not registered with the department but are actively doing business in Puerto Rico.
“We continue to work firmly with our inspection measures and today we began to send notifications to non-filers, using information from Form 1099, provided by the federal Internal Revenue Service (IRS),” Parés Alicea said. “We are also officially contacting merchants who are not registered with the department and are not paying local contributions.”
In the case of Notifications for Unreported Income, 4,440 taxpayers will receive, as of Thursday and during the next week, the notification from the Treasury. That group did not report income totaling $191 million, generated during the 2020 tax year. Last year another group of 2,905 taxpayers were notified for omission of income during the 2019 tax year and of the total, 324 complied with the filing of the Puerto Rico return, which represented collections of about $3.8 million.
Access to information on income generated and not reported is a product of the current agreement between the Treasury Department and the IRS. The exchange of information expanded with the digitization of systems in the Treasury and the emigration of all types of taxable income data to the SURI platform. By sharing information from 1099 forms, which is an equivalent of Form 480 or W-2, the Treasury gains knowledge of income. The notifications sent include Form 1099, which indicates the omitted income.
Also indicated are the compliance dates for the payment of unreported income and any outstanding balance. If the taxpayer does not agree, he or she must file an objection through email@example.com, on the indicated date.
If no action is taken, the Treasury has the power to prepare an official return, the integration of which into SURI the department is currently scheduling. The delinquent taxpayer is also subject to other penalties.
In the case of merchants, the identified group has an employer identification number in the IRS, but does not have a merchant registration on file with the Treasury. The Treasury is requiring about 6,541 identified merchants to register in SURI and request the merchant registration to be able to operate. Last year, 5,970 merchants were required to come into compliance, of which 1,142 proceeded to register. The Puerto Rico Internal Revenue Code of 2011 establishes certain penalties along with administrative fines and measures for those businesses that do not comply with their tax and contribution obligations, among them a penalty of up to $10,000 for failing to register and not obtain the merchant registration.
“Our recommendation to all taxpayers with outstanding balances is to opt for Voluntary Disclosure,” Parés Alicea said. “[That] can be done in person, in office 615 of the Intendente Ramírez Building in San Juan or electronically through firstname.lastname@example.org.”
The Voluntary Disclosure program has completed 1,320 cases of taxpayers with balances pending, which represented $254,331,696 in tax payments between the years 2009 and 2023.
Parés Alicea also announced that 34,233 taxpayers will receive a notice regarding the Economic Impact Payments Recovery Process for payments disbursed to ineligible individuals during the COVID-19 pandemic.
The process affects about 1.8% of the 1.8 million families that received the payments.
“The total disbursements of the $1,200 and $600 payments totaled $4,284 million for 1,889,058 families,” the Treasury chief said. The recovery notifications represent a total of $45.6 million.”