Legal Question in Tax Law in Puerto Rico
Foreign Tax Deduction
I'm writing on behalf of my father David--name removed-- He retired about 6 yrs ago from General Motors in Linden NJ where he was employed for about 30 yrs. My father relocated to Puerto Rico after retirement and has been living there since. Back in April of 2006 my father noticed that he had been deducted an extra $797.55 from his pension check, under a line item labeled Foreign tax. Both he and my mother new that it must have been some kind of mistake since P.R. is not a foreign country, but a common wealth of the U.S. My mother contacted the GM pension department has not been able to get any resolution since back in April. Unfortunately, my father has since been under severe stress, due to the fact that he cannot meet his financial obligation, since this deduction began. My father suffered a heart attack shortly after the initial discussions with G.M went no where. I believe the main reason why my father suffered that heart attack is because of the unnecessary stress he was put under. Last week my father yet suffered another heart attack and has been hospitalized and need to under go surgery to try and repair his heart. Is this legal and is there anything that we can do to try and expedite this issue. Thank You,
1 Answer from Attorneys
Re: Foreign Tax Deduction
This issue is far too complex. It cannot be gathered from the question if you want to know about a cause of action for damages against GM, or if you want to know about whether GM can treat Puerto Rico as a foreign country for purposes of its tax accounting practices.
The short answer to the first question would be that you would have to prove actual malice on the part of GM when they made the representations and withheld the tax amounts. Otherwise he would only be entitled to recoup the withheld amounts, if he proves that these were improperly withheld.
With regards to considering Puerto Rico as a foreign country, and without entering into the tax implications of the issue; you must remember that Puerto Rico is a territory of the United States and its not incorporated. Therefore, residents of the Commonwealth are not similarly situated as other citizens in the United States, particularly in issues regarding taxation.
The actual taxation of the proceeds and payments from the retirement plan must be consulted with a true specialist on the matter. It really does not seem proper for this kind of forum.
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