Puerto Rico tax is calculated according to how the employee fills out Form 499 R-4.1.
Setup in Clarity
Be sure that Clarity has been set up in the following way:
Steps:
- Under Configuration > Company > Company Edit > US Taxation.
Puerto Rico should be listed as a State. If it is not, use the ‘Add state’ button at the bottom of the screen. - For each employee that is to be taxed in Puerto Rico:
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- Go to Employees > Employee Master Paycard > Taxes tab.
Make sure that ‘Puerto Rico Income Tax’ is listed and that the ‘Active’ box is checked beside it. If it is not there, use the ‘Add tax’ button in the lower left to add it.
NOTE: If the employee has opted in Box D to pay additional withholding, then an additional code ‘Puerto Rico Additional Income Tax’ can be added to Clarity. - Once the proper items are set up:
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- Go to Employees > Taxation Information
Make sure that the employee’s Taxation State is Puerto Rico, and that the ‘State’ is also Puerto Rico.
Puerto Rico – State tax status
On this screen, Clarity complies with the Form 499 R-4.1 in the following ways:
(All dollar values listed below are annual amounts)
Exemptions:
This will contain the number of dependents from Box B of the Form 499 R-4.1 rounded up or down based on preference if the employee has chosen ‘Joint Custody’.
This would result in an additional exemption of $2,500 per dependent or $1,250 if the employee has indicated filing jointly (see below for description).
Filing Status:
As indicated in Box A, on lines 1 and 2, select the employee’s personal exemption status. This will result in a personal exemption amount of $3500 for single and $7000 for married, as well as 0 for none. Head of Household will apply $7000 as the base allowance in ‘Total Number of Allowances’, below.
Filing Jointly checkbox:
If, above Box A, the employee has checked the box for ‘Check here if you choose the optional computation of tax in the case of married individuals living together and filing a joint return’
Total Number of Allowances:
These each represent $500 of allowances.
Box C Line 4 indicates how many allowances the employee wants to claim, generally, this value should be entered into the ‘Exemptions’ box.
Note: If the employee has indicated in Box C line 1 that they choose ‘Complete’, please see the instruction sheet for Form 499 R-4.1 (This will result in an ADDITIONAL number of exemptions, worth $500 credit each, that you will add to the other exemptions as indicated by the employee). If the employee has indicated on Box A line 3 that they wish to claim veteran status, add 3 additional exemptions (the veteran exemption is $1500)
Summary:
If the last check box above section A is checked, then check ‘Filing Jointly’.
Select the appropriate ‘Filing Status’ based on Section A. If Section A line 3 (Veteran’s Personal Exemption), is filled out, add 3 to the total for ‘Allowances’.
The number of dependents from Section B should be indicated under ‘Exemptions’. If the employee has indicated ‘Joint Custody’, add this number divided by 2 (round up or down as the employee chooses). This section will assume a personal exemption based on ‘Filing Status’.
Section C, Line 4 should be added to the value put into ‘Allowances’.
Example 1:
Form 499 R-4.1:
Section A: The employee has indicated ‘Complete’ on Line 1
Section B: The employee has put 4 under ‘Complete Exemption’ and 3 under ‘Joint Custody’
Section C: The employee has indicated 2 on Line 4.
In Clarity:
Exemptions: 5 (or 6)*
Filing Status: Single or married claiming all
Total number of allowances: 2
Notes for example 1: *Exemptions is 4 from Section B ‘Complete Exemptions’, plus half of the ‘Joint Custody’ value.
Example 2:
Form 499 R-4.1:
Section A: The employee has indicated ‘Complete’ on Line 2 and indicated ‘Complete’ on line 3.
Section B: The employee has put 2 under ‘Complete Exemption’
Section C: The employee has indicated 0 on Line 4.
In Clarity:
Exemptions: 2
Filing Status: Married or Head of Household
Total number of allowances: 3
Notes for example 2: Head of household is claimed to allow for the $7000 personal deduction. If the employee had indicated ‘Half’, then the ‘Single or married claiming all’ or ‘married claiming half’ options could be used. There are 3 allowances to account for the $1500 Veterans allowance. Had there been any allowances in section C, they would also have been added here.Add state Puerto Rico and enter information from Form 499 R-4.1