Hawaii Withholding Tax Nonpayment Emergency
Checklist
Hawaii withholding tax nonpayment occurs when an employer fails to deposit withheld employee state income taxes or fails to remit these obligations to the Hawaii Department of
Taxation. These taxes are withheld from employee paychecks and are considered trust funds held temporarily by the employer before remission to the state.
Nonpayment is a serious compliance issue because these funds belong to employees, not the employer, and the state treats unpaid withholding taxes differently from other business debts. To address withholding tax delinquency, the state has established administrative collection procedures, including notices, penalties, and potential enforcement actions.
What This Issue Means
Hawaii withholding tax nonpayment means that the withheld employee's Hawaii income tax has not been deposited or remitted to the Hawaii Department of Taxation by the due date. Under
Hawaii Revised Statutes Section 235-64, all taxes withheld by an employer are held in trust for the state.
Why the State Issued This or Requires This
The state identifies withholding tax delinquency through its accounting systems when deposits or remittance reports are not received by the due date. Payment frequency depends on your
withholding tax liability
- Employers with annual liability greater than forty thousand dollars must make
semi-weekly payments.
- Employers with liability between five thousand and forty thousand dollars make monthly
payments.
- Employers with liability less than five thousand dollars make quarterly payments.
What Happens If This Is Ignored
If nonpayment is not addressed, the state typically issues additional notices and may pursue collection actions, including wage garnishment, bank levies, or liens against business or personal property. Under Hawaii Revised Statutes Section 235-64, if an employer fails, neglects, or refuses to deduct and withhold from wages paid to employees, the employer will be personally liable to pay the amount of tax to the state.
What This Does NOT Mean
Nonpayment does not automatically mean criminal charges have been filed or that the business will be immediately closed. It does not mean the state has already seized assets or garnished wages, though these actions may follow if nonpayment is not resolved.
Checklist: What to Do After Receiving Notice or
Identifying This Issue
Step 1: Locate and Review All State Correspondence
Find all notices, letters, or documents from the state tax department. Read each document carefully to identify the tax type, the tax period or periods involved, the amount owed, any deadline mentioned in the notice, and the department contact information provided.
Step 2: Verify the Debt and Gather Payroll Records
Pull your payroll records for the periods listed in the notice, including copies of Form W-2 or
Form HW-2 issued to employees. Review your income tax withholding deposit history for those periods and identify deposits you made with dates and amounts.
Step 3: Determine the Current Status of Your Business
Confirm whether your business is currently operating and whether you are currently withholding and depositing taxes. Note any changes in business status since the delinquent period, such as closure, sale, reorganization, or change in payroll provider.
Step 4: Contact the Hawaii Department of Taxation
Call the department at the phone number listed on your notice. Have your business tax identification number, notice number, payroll records, and copies of Form W-2 or Form HW-2 ready when you call.
Step 5: Request Written Confirmation of the Debt
Follow up your phone call in writing by email or mail, or submit your request through Hawaii Tax
Online. Ask the department to send you a written statement of the account showing all amounts owed, a breakdown of principal, penalties, and interest, confirmation of all periods involved, and confirmation of any deposits received and how they were applied.
Step 6: Determine Whether You Dispute the Amount Owed
Compare the state’s claim to your records, including your Form W-2 and Form HW-2 submissions. Identify any deposits you made that the state may not have received or correctly posted, and look for calculation errors in penalties or interest.
Step 7: Explore Resolution Options
Ask the department whether installment payment plans are available and about the terms, including the number of payments, payment amount, and frequency. Hawaii charges a non-refundable fifty-dollar processing fee when a payment plan request is approved, which can be paid through Hawaii Tax Online.
Step 8: Resolve the Debt or Set Up a Payment Arrangement
If paying in full, confirm the exact amount to be paid and the mailing address or payment method, including electronic payment options available through Hawaii Tax Online. If setting up an installment plan, complete all forms required by the department and understand that failure to comply with payment plan conditions will constitute default on the agreement.
Step 9: Address the Underlying Cause
Determine why the nonpayment occurred, whether due to cash flow, accounting error, system failure, or misunderstanding of requirements. Verify that employees are completing Form HW-4 correctly to ensure proper calculations, and implement procedures to ensure taxes are withheld and deposited correctly going forward.
- Missing deadlines in notices can result in escalated collection action or loss of payment
- Not responding to follow-up notices may result in liens, levies, or wage garnishment.
- Providing incomplete or incorrect information may delay resolution or result in collection
- Assuming the notice is an error without verification is premature without comparing
- Failing to deposit current taxes while addressing past debt creates additional
- Not documenting payments or arrangements leaves no proof of compliance.
- Neglecting to verify that employees have submitted current Form HW-4 forms can lead
- 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
Step 10: Monitor Compliance Going Forward
All employers file quarterly returns using Form HW-14, regardless of payment frequency.
Maintain records of all deposits and remittances, including copies of Form HW-14 and Form
W-2 or Form HW-2 submissions, and review your account with the department periodically.
What Happens After This Is Completed
After you contact the department or submit payment or payment arrangement information, the state typically acknowledges receipt and processes your request according to its procedures.
Hawaii income tax withholding must be assessed or levied within three years after the return was filed or three years from the due date of the return, whichever is later.
Once assessed, the state generally has fifteen years from the date of assessment to collect the tax debt. If you have made a payment, the department applies it to the account and issues an updated statement showing the remaining balance.
Common Mistakes to Avoid plan options. action. records. delinquency. to incorrect withholding amounts.
Frequently Asked Questions
How do I know if the amount the state claims is correct?
Obtain a written statement of account from the department showing the amount owed, the periods covered, and the breakdown of principal, penalties, and interest. Compare this to your payroll records, deposits, and Form W-2 or Form HW-2 filings.
Can penalties be reduced or removed?
Under Hawaii Revised Statutes Section 231-3(12), the department may remit penalties added to delinquent taxes in cases of excusable failure to file or pay, except in cases of fraud, willful violation, or willful refusal to make a return. Contact the department to request penalty relief and provide documentation supporting your case.
What if my payroll service provider failed to remit the taxes I withheld?
You remain personally liable to the state for withholding taxes withheld from employees under
Hawaii Revised Statutes Section 235-64, even if a third party failed to remit them. You may have a claim against the payroll provider, but you must resolve the debt with the state separately.
If I set up a payment plan, what happens if I miss a payment?
Failure to comply with payment plan conditions will constitute default on the agreement, and the department may take enforcement actions for the entire amount owed.
Can the state garnish wages or seize bank accounts for unpaid withholding taxes?
Yes, the state has the authority to use collection tools, including wage garnishment and bank levies for unpaid taxes, after other attempts to collect have been unsuccessful.
How long does the state have to collect this debt?
Hawaii withholding tax must be assessed within three years after the return was filed or from the due date, whichever is later. Once assessed, the state generally has fifteen years from the date of assessment to collect the tax debt.
What if my business has closed?
A closed business does not eliminate the withholding tax debt. The owner or responsible party remains personally liable under Hawaii Revised Statutes Section 235-64 for unpaid withholding taxes.
Should I ensure my employees have completed Form HW-4?
Yes, ensuring employees complete Form HW-4 correctly helps calculate proper withholding amounts and prevents future withholding errors that could lead to additional compliance issues.
Moving Forward
Hawaii employer withholding tax liability is a significant compliance matter that requires prompt attention and clear communication with the Hawaii Department of Taxation. Gathering your records, contacting the department, and responding to notices in a timely manner form the foundation of resolving this issue and avoiding escalation.
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.
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