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Are You At Risk for an IRS Puerto Rico Act 60 Criminal Tax Audit?

Offshore Account Update

Posted on September 15, 2023 |

The Internal Revenue Service (IRS) has announced that it is targeting high-income taxpayers who claim exemptions from federal income tax liability under Puerto Rico Act 60. Not only is the IRS targeting taxpayers for civil enforcement, but it is also pursuing criminal tax evasion charges in some cases.

IRS criminal tax audits present substantial risks for both individuals and businesses. This is especially true when the IRS is focusing on a specific enforcement priority, such as Puerto Rico Act 60. Criminal tax audits present risks for both fines and prison time—including the risk of hundreds of thousands (if not millions) of dollars in financial liability and decades of federal incarceration in some cases.

What is the IRS Targeting Under Puerto Rico Act 60?

Puerto Rico Act 60 allows individuals and businesses to achieve substantial tax savings by transitioning their residency to the island territory. Under the Act, individuals can qualify for a 100-percent tax exemption on dividends, interest and capital gains, while businesses can claim a tax rate of zero or four percent for services performed in Puerto Rico.

The IRS is targeting individuals and businesses that claim the tax benefits of Puerto Rico Act 60 without qualifying. In particular, it is focusing on high-income taxpayers such as traders and business owners who either (i) have not established residency in Puerto Rico or (ii) are claiming the Act’s tax benefits for non-qualifying income.

Which Taxpayers Are At Risk?

Taxpayers who are at risk of facing IRS criminal tax audits include high-income individuals and businesses that have not taken all of the steps necessary to clearly establish their eligibility under Puerto Rico Act 60. For example, individuals who claim Puerto Rico residency but still spend the majority of their time in the United States are prime targets for the IRS. Likewise, businesses that claim federal income tax exemptions under the Act but still employ U.S.-based workers are at high risk of facing criminal tax audits as well.

What Should You Do When Targeted in an IRS Puerto Rico Act 60 Criminal Tax Audit?

When facing scrutiny from the IRS, it is critical to promptly engage an experienced IRS criminal tax attorney to deal with the agency on your behalf. Criminal tax audits can progress quickly, and taxpayers who ignore the risks of these audits (or make other mistakes) can suddenly find themselves facing serious federal charges. With a proactive defense strategy, this can be avoided in many cases, and it will often be possible to negotiate a favorable resolution with the IRS.

Contact New Jersey Criminal Tax Lawyer Kevin E. Thorn

If you need to know more about the risks of facing an IRS criminal tax audit involving Puerto Rico Act 60, contact us to arrange a confidential consultation. To schedule an appointment with New Jersey criminal tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 201-842-7696 or contact us confidentially online now.

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