Summary of What This Blog Covers
- Many Puerto Rico expats face tax issues due to CPAs lacking U.S.–PR dual filing expertise.
- Missed deadlines, vague advice, and poor setup can jeopardize Act 60 benefits.
- FBAR and foreign reporting are often overlooked, triggering IRS penalties.
- Insogna offers expert Act 60 support with proactive, dual-jurisdiction planning.
Moving to Puerto Rico under Act 60 (formerly Acts 20 and 22) opens the door to some of the most compelling tax incentives available to U.S. citizens today. From 0% tax on long-term capital gains to a flat 4% corporate tax rate on export services, the benefits are real but they’re only available if your tax structure, filings, and residency compliance are executed precisely.
That’s where many expats run into trouble.
At Insogna, we’ve seen the full range of situations from perfectly structured, tax-efficient plans to chaotic, noncompliant filings that place clients at serious financial risk. Many of the problems we encounter share the same root cause: expats working with accountants who lack the specific experience needed to manage both U.S. and Puerto Rico tax requirements.
Whether you’re an entrepreneur, investor, or consultant now living on the island, this guide outlines the six most common CPA-related problems Puerto Rico expats face and how to fix them.
1. Delayed or Missed Tax Filings
One of the most damaging issues for Puerto Rico expats is late filing especially when your CPA doesn’t understand the dual jurisdictional system you’re living under.
Filing your U.S. taxes late is one problem. Filing late in Puerto Rico can be even worse. And missing required reports like the FBAR (Foreign Bank Account Report) can lead to significant penalties, even if your finances are otherwise clean.
Here’s what many expats don’t realize:
- Puerto Rico operates its own Department of Treasury (Hacienda), with its own filing rules, forms, and systems separate from the IRS.
- If you’re living in Puerto Rico and claiming tax benefits under Act 60, you are required to file both Puerto Rico tax returns and U.S. returns every year.
- In many cases, you must also file Form 8898 to notify the IRS of your change in tax home to Puerto Rico, plus FBAR and FATCA forms if you hold qualifying assets or accounts.
Failure to file on time or omitting a required form can lead to the following outcomes:
- Revocation of your Act 60 tax decree
- IRS penalties and interest
- Loss of eligibility for 0% capital gains treatment
- Increased audit risk from both jurisdictions
How Insogna helps:
We take a proactive approach to deadline management. Our Austin, Texas CPA team sets up integrated filing calendars for both U.S. and Puerto Rico deadlines and tracks your filing obligations on a rolling basis. You’ll receive reminders, document requests, and filing updates throughout the year not just during tax season.
2. Poor Communication and Vague Advice
Communication issues are the most frustrating and preventable CPA problems for expats.
Imagine you’re about to sell a major asset, finalize a business contract, or plan an exit. You ask your CPA for guidance, and… silence. Or worse, you get a short email response that doesn’t fully address the question and leaves you unsure of what to do next.
When you’re managing tax compliance in two jurisdictions, you need more than a reactive tax preparer. You need a responsive partner. Timing matters. Miscommunication leads to missed opportunities and costly mistakes.
Common issues we’ve seen include:
- CPAs failing to explain how U.S. vs. Puerto Rico sourcing affects taxability
- Incomplete guidance around residency thresholds or Act 60 donation requirements
- Missed recommendations for required filings like FBAR or Form 5471 (for foreign corporations)
How Insogna helps:
Our clients work with a dedicated certified public accountant, supported by a knowledgeable tax advisory team. We deliver high-touch, concierge-level communication via scheduled check-ins, detailed planning calls, and email responses within industry-leading turnaround times. Clarity isn’t optional, it’s our standard.
3. Lack of Dual U.S.–Puerto Rico Tax Expertise
Many CPAs specialize in either U.S. tax law or Puerto Rico tax law, but not both. This is one of the most significant gaps we see because dual-jurisdiction tax planning is not intuitive.
Puerto Rico is a U.S. territory, yes—but its tax system is separate from the U.S. federal tax code. Act 60 residents must comply with both. The challenge? The rules around income sourcing, tax home designation, and residency aren’t always straightforward and even small missteps can have major consequences.
Examples of what can go wrong:
- Misclassifying income as Puerto Rico-sourced when it should be U.S.-sourced (leading to incorrect tax treatment)
- Forgetting to file U.S. returns due to the mistaken belief that residency in Puerto Rico removes all federal obligations
- Improperly setting up entities that don’t qualify for the 4% corporate tax under the export services incentive
- Failing to meet closer connection tests, nullifying U.S. tax exemptions
How Insogna helps:
As a leading firm with accountants with deep experience in international and expat tax planning, we bring the expertise required to navigate both tax codes. Our certified public accountants near you not only understand the distinctions. They actively structure, file, and advise on tax plans that span both systems, including all required U.S. and Puerto Rico disclosures.
4. Incorrect or Incomplete Act 60 Setup
Unfortunately, many taxpayers arrive in Puerto Rico believing they’re eligible for the benefits of Act 60 only to find out later that they’ve missed key requirements. In some cases, they never filed for the decree at all. In others, their CPA failed to structure their business correctly.
Without a valid Act 60 decree, you are not eligible for any of the tax incentives. The IRS does not offer leniency for misunderstandings.
To maintain your Act 60 status, you must:
- Apply for and receive an Act 60 tax decree
- Set up a Puerto Rico-based business that meets the criteria for export services
- Make the required $10,000 annual charitable donation to qualifying Puerto Rico nonprofits
- Purchase and maintain a residential property in Puerto Rico within two years of decree approval
- Maintain closer personal and business connections to Puerto Rico than any other location
If you fail to meet these, you risk:
- Losing your 4% corporate tax rate
- Being taxed on all Puerto Rico-sourced income at standard U.S. federal rates
- Losing access to the 0% long-term capital gains treatment on Puerto Rico-sourced assets
How Insogna helps:
We review and correct Act 60 structures through our comprehensive audit and cleanup service. Whether you’re starting fresh or fixing past errors, we handle every step from entity setup and charitable compliance to payroll and documentation so your incentives are not just earned, but protected.
5. Overlooking FBAR, FATCA, and Foreign Reporting
Many Puerto Rico expats are shocked to learn that they’re required to file foreign asset disclosures with the U.S. government even though they’re still within a U.S. territory.
Here’s why: Under the Bank Secrecy Act, Puerto Rican financial institutions are still considered foreign for FBAR purposes. This means that if you hold more than $10,000 across any combination of Puerto Rico-based bank accounts, you must file FinCEN Form 114 (FBAR).
Other disclosure requirements may include:
- Form 8938 (FATCA) for financial assets
- Form 5471 for ownership in foreign corporations
- Form 8621 for Passive Foreign Investment Companies (PFICs)
Missing any of these disclosures even unintentionally can result in:
- Civil penalties starting at $10,000 per violation
- Additional IRS scrutiny or audits
- Potential loss of Act 60 protections if found out of compliance
How Insogna helps:
Our FBAR and foreign reporting specialists proactively review your account activity and advise on all necessary disclosures. We prepare and file these reports as part of your annual compliance package and offer audit defense support if needed.
6. No Strategic Tax Planning. Only Compliance Filing.
Even if your CPA is filing correctly, if they’re not planning ahead, you’re missing out.
Here’s the difference: tax compliance is about checking boxes and submitting forms. Tax strategy is about anticipating what’s next, minimizing risk, and maximizing opportunity. This is especially important in Puerto Rico, where the timing of income, asset sales, and residency decisions directly impacts your tax position.
Consider these scenarios:
- If you sell an asset with capital gains before becoming a bona fide resident, it’s taxable in the U.S.
- If you receive dividends from a U.S. entity instead of a PR one, you may not be eligible for the 0% dividend treatment.
- If you leave Puerto Rico mid-year and re-establish ties to another jurisdiction, you may void your residency status retroactively.
How Insogna helps:
We operate as strategic advisors, not just tax preparers. Our quarterly check-ins, forecasting sessions, and residency tracking tools help clients plan their decisions in real time. As your small business CPA in Austin, we’re invested in your outcomes, not just your filings.
Ready for an Expert Review?
If any of these issues sound familiar (missed filings, vague advice, confusing reporting, or a structure you’re not sure is right), it may be time for a second opinion.
At Insogna, we offer:
- Comprehensive Act 60 structure audits
- Dual-jurisdiction tax strategy planning
- Full-service filing for both U.S. and Puerto Rico
- FBAR and FATCA compliance
- Concierge communication from a licensed CPA team with Austin accounting roots and expat experience
Let Us Audit Your Current CPA Before the IRS Does
Our approach is simple: get it right the first time or help you fix it fast. If your current CPA lacks Puerto Rico tax expertise, let us show you what proactive, strategic, and high-touch accounting really looks like.
Schedule your consultation with Insogna today, your trusted Austin tax accountant, Act 60 advisor, and lifelong partner in smarter tax planning.