Caution:

The U.S. Treasury Department and Puerto Rico entered into an agreement under 5 U.S.C. section 5517 in November 1988. Under this agreement, all federal employers (including the Department of Defense) are required to withhold Puerto Rico income taxes (rather than federal income taxes) and deposit the Puerto Rico taxes with the Puerto Rico Treasury for employees whose regular place of federal employment is in Puerto Rico. Federal employers are also required to file quarterly and annual reports with the Puerto Rico tax department. The 5517 agreement isn’t applicable to payments made to pensioners and compensation paid to members of the U.S. Armed Forces who are stationed in Puerto Rico but have a state of legal residence outside Puerto Rico. For more information, including details on completing Form W-2, go to IRS.gov/5517Agreements .