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Wages and cost-of-living allowances paid by the U.S. Government or one of its agencies for working in Puerto Rico are subject to Puerto Rican tax. The cost-of-living allowances are excluded from Puerto Rican Gross income up to the exempt from U.S. tax.
These wages are also subject to U.S. tax but the cost-of living allowances are excludable. A foreign tax credit is available in order to ovoid double taxation.

If you have no U.S. filing requirements but have income that is effectively connected with a trade or business in Puerto Rico, you must file Form 1040-SS or Form 1040-PR with the United States to report your self-employment income and if necessary pay self-employment tax.

Phone number for information outside of Puerto Rico is 787-721-2020 Extension 3611
Within Puerto Rico call 1-800 981-9236
The Puerto Rican website is www.hacienda.gobierno.pr or email questions to infoserv@hacienda.gobierno.pr

If you are a U.S. citizen or resident alien you will satisfy the presence test for the entire year if you meet one of the following conditions.
You were present in Puerto Rico for at least 183 days during the tax year.
You were present in Puerto Rico for at least 549 days during the 3 year period that includes the current year and the 2 immediately preceding tax years. During each year of the 3 year period you must be present in Puerto Rico for at least 60 days
You were present in the United States for no more than 90 days during the year. You had earned income in the U.S. of no more than $3,000 and were present for more days in Puerto Rico than in the U.S. during the year.
You had no significant connection to the United States during the tax year.

Generally, you are a bona fide resident of Puerto Rico if during the year you meet the presence test, do not have a tax home outside of Puerto Rico and do not have a closer connection to the U.S. or to a foreign country than to Puerto Rico.

You can generally deduct a casualty or disaster area loss only in the tax year in which the casualty or disaster occurred. You can generally deduct a theft loss only in the year you discovered your property was stolen. However, you can choose to deduct disaster area losses on your return for the year immediately before the year of the disaster if the President has declared your area a federal disaster area.
For details, see Disaster Area Losses in Publication 547.

After you have figured the amount of your loss, as discussed earlier, you must figure how much of the loss you can deduct. You do this on Form 4684, section A. If the loss was to property for your personal use or your family's, there are two limits on the amount you can deduct for your casualty or theft loss.
1.You must reduce each casualty or theft loss by $100 ($100 rule).
2.You must further reduce the total of all your losses by 10% of your adjusted gross income (10% rule).

You figure the amount of your loss using the following steps.
1.Determine your cost or other basis in the property before the casualty or theft.
2.Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. (The decrease in FMV is the difference between the property's value immediately before and immediately after the casualty or theft.)
3.From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive

A deductible loss can result from a number of events. Here are some examples:
•Storm (including hurricanes and tornadoes). •Flood and wind, •Fire, •Earthquake,
•Other “sudden and unexpected events,” such as an automobile accident, also qualify as a casualty for tax purposes.

The Taxpayer Advocate Service "TAS" can help if you can’t resolve your problem with the IRS. If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on the IRS website at www.irs.gov/advocate. You can also call the toll-free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059.
TAS is your voice at the IRS. The TAS job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. They offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own.
If you qualify for our help, They will do everything they can to get your problem resolved. You will be assigned to one advocate who will be with you at every turn. They have offices in every state, the District of Columbia, and Puerto Rico. Although TAS is independent within the IRS, the advocates know how to work with the IRS to get your problems resolved. And the services are always FREE.
As a taxpayer, you have rights that the IRS must abide by in its dealings with you. The tax toolkit at www.TaxpayerAdvocate.irs.gov can help you understand these rights.