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this is Texas made simple. The only podcast that gives you the

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tax information you need without

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going too far into the weeds. I am chase Berkey, CEO and

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co-founder of dark CPAs.

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And you are curious about this

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whole idea of moving to Puerto

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Rico to avoid federal income tax.

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Notice how I did not use the word E-bay.

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It is illegal to evade

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taxes in the United States.

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As it is most countries. And this is precisely what the

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IRS believes is happening with

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those who have falsely claimed

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residency in Puerto Rico in order

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to not pay income taxes to the IRS.

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Puerto Rico, as many folks know

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is a tax Haven for those Americans

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willing to give up their right to

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vote and move to the island nation

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for more than half of the year. But unfortunately for those who

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have done this, they're about to

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find out that it's not that simple. You can't just park

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yourself there for 183 days.

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A year in call it good. There's more to it.

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And folks are about to find out the

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hard way that the IRS has launched

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a coordinated campaign with Puerto

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Rico to audit those us companies

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and individuals who relocated to

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Puerto Rico over the past decade.

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So if you're thinking about moving to

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Puerto Rico, it would be unwise in this

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regulatory environment to try to do just

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the bare minimum to qualify for residency.

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It's not simply a matter

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of paying back taxes.

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If the IRS audits you and assesses

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tax for previous years, there would

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be substantial penalties and interest

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on top of potential criminal charges.

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If the IRS believes that you

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are knowingly evading taxes.

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So a question we get a lot

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here at dark horse is how do

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I build a case for residency? Admittedly, this question arises due

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to the fact that the person usually

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doesn't want to live full-time in

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the tax Haven jurisdiction, whether

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that is another state or country. So they're usually trying to do the

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bare minimum to qualify and minimize

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disruption to their life in their

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preferred higher tax jurisdiction.

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Thus, my blanket advice to people

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is to live like you would live

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if you live there full time. Auditors will look at everything,

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literally everything to make the assertion

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that the competing tax jurisdiction

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is not truly your main residence.

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Does your family live in the United

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States while you're in Puerto Rico?

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Is your home bigger and better with your

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prize possessions in the U S are you

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registered to vote in the U S still does

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your bank and credit card statements

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show purchases during the time period

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that you claim to be in Puerto Rico?

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Does your electric bill suggest

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that the home in Puerto Rico was

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unoccupied for periods of time that

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you claim to be in Puerto Rico?

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These are just some of the

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questions that if you answered yes

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to, you're going to find yourself

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on the wrong end of an audit.

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You see, there's not a predefined

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set of criteria that you can

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check off and then be able to rest

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easy that you're in the clear.

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The determination is based on

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the facts and circumstances.

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And auditors will weigh the

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evidence as a whole with an implicit

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bend towards proving you wrong. Otherwise they wouldn't be

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spending their time auditing you.

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It's almost impossible to plan for

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an execute, everything you would need

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to in order to bolster your case,

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if it's not truly your residence.

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So if you're going to live there to

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take advantage of the tax breaks,

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really embrace living there for

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the years that you're trying to

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take advantage of the tax Haven. If you try to live the best of

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both worlds, you're likely going

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to find yourself in hot water. And no, I'm not referring to the

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warm ocean water in Puerto Rico.

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Let's say you do actually

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live in Puerto Rico.

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It's not like you just don't have

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to file a U S income tax return

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for the years that you live there. On the contrary, if you have

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us source income, you're

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still gonna owe taxes on it. Just like any other foreign national

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who earns money in or from the U S.

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Not filing a return when you

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have us sourced income is going

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to put you in hot water too. Even if the IRS agrees that you're

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a resident of Puerto Rico or any

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other country for that matter. So, um, a big part of the determination

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as to whether moving to Puerto Rico is

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going to save you a meaningful amount of

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taxes is to understand whether the income

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you're generating while living there can

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actually be sourced to Puerto Rico or

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whether by nature, it has a us source.

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A simple example would be owning a

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McDonald's franchise in Florida, even

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though you might manage it from afar, the

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income is earned in the good old us of a,

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and you cannot make a defensible argument.

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Otherwise. The central point I'm trying to

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drive home here is that you've got

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to understand how much of your income

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you can legally source to Puerto

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Rico or any other foreign country.

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For that matter in the inherent lifestyle

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sacrifices, you'd have to make, to

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uproot your life, to determine at the

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end of the day, if it's truly worth it.

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My suspicion is that a less rose

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colored analysis of this trade-off

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would lead to less people leaving

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the U S anyway, that's it for now?

4:52

Thanks for tuning into

4:52

TMS or taxes made simple.

4:55

If you're not into the whole

4:55

brevity thing, because there's

4:57

TMI and then there's TMS.

4:59

And if you like the show or you just

4:59

like the sound of my voice, please

5:03

give us a review on whatever podcast

5:03

or know, listening to us though.

5:07

See you next week.