Hawaii Payroll Tax Default Prevention Checklist
What the Hawaii Withholding Tax Means
Hawaii requires employers to withhold state income tax from employee wages and remit those amounts to the Hawaii Department of Taxation. This withholding obligation applies to wages for services performed in Hawaii and to certain wages paid to employees whose regular place of employment is in Hawaii.
Why Employers Must Comply
The Hawaii Department of Taxation monitors employer compliance with withholding tax filing and payment deadlines. Employers hold employee income tax in trust and must remit these amounts to the state according to statutory deadlines.
Failure to file returns or pay withheld taxes on time triggers automatic penalties and interest charges. State law treats withholding tax compliance as a serious legal obligation because the funds belong to employees and must be transferred to the state treasury.
Consequences of Noncompliance
Employers who ignore Hawaii withholding tax compliance face multiple enforcement actions from the state. The Hawaii Department of Taxation assesses penalties for late filing at five percent per month up to a maximum of twenty-five percent of the unpaid tax.
Interest accrues at two-thirds of one percent per month on all unpaid taxes and penalties from the date payment was due. Beyond financial penalties, the state may file a tax warrant against the business, which creates a legal claim that can lead to bank levies, wage garnishments, or business license suspension.
Filing Requirements for Form HW-14
All employers with withholding tax obligations must file Form HW-14, officially titled the
Withholding Tax Return. Filing frequency depends on annual withholding liability
- Employers with an annual withholding tax liability of one thousand dollars or more must
file Form HW-14 monthly.
- Employers with annual withholding tax liability below one thousand dollars must file Form
HW-14 quarterly on April 15, July 15, October 15, and January 15.
Each return must report total wages paid and total taxes withheld for the filing period. Returns must be filed even when no wages were paid during the period by entering zero on the appropriate lines.
Payment Schedules Based on Liability
Payment frequency for Hawaii withholding tax depends on the employer’s total annual withholding liability amount. Employers with annual withholding liability exceeding forty thousand dollars must remit tax payments on a semi-weekly schedule within three business days of the payroll date.
Businesses with annual liability between five thousand and forty thousand dollars must make monthly tax payments by the fifteenth day of the following month. Annual liability below five thousand dollars requires quarterly payments by the fifteenth day of the month following each quarter.
Annual Wage Reporting Requirements
Employers must issue Form W-2 or Form HW-2 to each employee by January 31 following the close of the calendar year. Copies of all Form W-2 and Form HW-2 wage statements must be submitted to the Hawaii Department of Taxation by the same deadline.
How to Address Withholding Tax Issues
Contact the Hawaii Department of Taxation immediately when you identify a filing or payment default. Call the department at 808-587-4242 or toll-free at 1-800-222-3229 to discuss your account status and current balance.
Request a complete account transcript showing all periods owed, payment history, and assessed penalties and interest. Gather all notices received from the state and review your payroll records to verify the accuracy of the department’s claims.
Steps to File Delinquent Returns
Obtain your payroll records for all periods with unfiled returns and calculate total wages paid and income tax withheld for each period. Download Form HW-14 from the Hawaii Department of
Taxation website or access the form through Hawaii Tax Online.
Complete a separate tax return for each unfiled period and include your business identification information and the specific filing period. Submit all delinquent returns to the address provided by the department or file electronically if your annual liability exceeds forty thousand dollars.
Payment Plans and Penalty Relief Options
Ask the Hawaii Department of Taxation whether a payment plan is available if you cannot pay the full amount owed immediately. The department may approve installment agreements based on the amount owed and your ability to pay.
Penalty abatement requires demonstrating reasonable cause for the failure to file or pay income tax on time. Reasonable cause means circumstances beyond your control prevented compliance despite ordinary business care and prudence.
Submit a written request for penalty abatement that explains the specific circumstances and includes supporting documentation. Interest generally cannot be waived under Hawaii law and continues to accrue until the tax is paid in full.
Electronic Filing and Payment Requirements
Employers whose annual withholding tax liability exceeds forty thousand dollars must file Form
HW-14 electronically through Hawaii Tax Online. These employers must also make all tax payments electronically using the state’s online portal.
Businesses that fail to file or pay electronically when required face a two percent penalty on the total tax amount. A waiver from electronic filing requirements may be requested by submitting
Form L-110 to the Hawaii Department of Taxation.
Record Retention and Documentation
Maintain complete payroll records for at least three years following the filing of each return or the due date of the return, whichever is later. Keep copies of all filed returns, payment receipts, account transcripts, and correspondence with the Hawaii Department of Taxation.
Document all telephone conversations with the department by recording the date, time, representative’s name, and summary of the discussion. Store employee wage records, tax calculation worksheets, and copies of Forms W-2 or HW-2 issued to employees for verification purposes.
Facing State Enforcement or Payroll Tax Issues?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
We help with
- State enforcement actions and notices
- Payroll tax debt review and resolution
- Penalty and interest reduction options
- Payment plans and compliance solutions
- Representation before state tax agencies
20+ years experience • Same-day reviews available
