Fortify Your S-Corp Tax Strategy Against Audits

In an audit, your income sourcing methodology for your S-Corp will be the primary target. The burden of proof is on you to demonstrate, with extensive documentation, that your service income was generated from work performed in Puerto Rico. A weak or poorly documented sourcing strategy is the fastest way to lose your Act 60 benefits. Our process helps you build a robust defense by analyzing your operational footprint, client contracts, and employee activities to create a defensible sourcing file. This is the level of preparation needed to withstand scrutiny from agencies like the IRS, as highlighted in their recent enforcement campaigns.

Your choice of a Puerto Rico versus a U.S. S-Corp is a critical element of your audit defense strategy. An improperly structured entity can create unintended U.S. tax nexus, giving the IRS jurisdiction to challenge your Act 60 claims. We analyze your corporate veil, governance, and intercompany agreements to ensure your entity structure is a fortress, not a liability. This proactive defense is essential for anyone serious about long-term wealth preservation under Act 60, especially in light of the GAO's report (GAO-26-107225) on compliance issues.

The IRS has explicitly announced its focus on Act 60 participants, and S-Corporations are a known area of interest due to their complexity. This is not a theoretical threat. Our 'Shield' service is built with this reality in mind. We stress-test your S-Corp's tax positions against the very tactics and arguments agents are trained to use. This includes a deep dive into your reasonable compensation levels, the economic substance of your PR operations, and the distinction between pass-through income and shareholder distributions. We help you prepare for the questions they will ask before they ever ask them.