Hawaii Taxing Information
The Department of Taxation may take collection actions on delinquent taxes including the filing of liens, seizure and sale of assets, referral to collection agencies and more. Unless the Department of Taxation determines that the state's interests are in jeopardy, they will exhaust all other collection attempts before seizing assets. You will receive written notification to the last known address on file with the state, of possible collection actions.
Priority One: Stopping Aggressive Enforced Collections
You have the right to request that DOTAX consider a compromise offer as long as the offer is based on doubt as to liability or doubt as to collectability. You will need to submit a written offer and may need to include detailed financial statements or supporting documents. If a compromise offer is accepted it will reduce the amount of your overall tax liability, penalty and/or interest. Upon notification in writing of the acceptance of the offer, you may be required to enter into a collateral agreement, waive tax refunds or post security to protect the state's interest. The state may reopen the matter if you default on any payment or breach any collateral agreement entered into with the state.
DOTAX may consider a request for an installment agreement that will allow you to pay off your tax debt over a period of time. If you are approved for an installment agreement interest will continue to accrue on the unpaid tax liability and penalties until paid in full. Any credits due to you from other taxes may be offset and applied to your payment plan liability.
Interest will be charged and may be assessed, collected and paid in the same manner as taxes, on any tax not paid by the due date. Interest on unpaid taxes is assessed at a rate of two-thirds of one percent for each month of fraction of a month that the tax remains unpaid.
You may request a waiver of interest if you are able to show that failure to pay on time or to file on time was due to a reasonable cause and not due to neglect, carelessness, or disregard of the tax code.
If taxes, penalties, or interest are not paid on time a lien may be placed on your personal property, real estate, bank accounts, accounts receivable and similar items. Liened property may be subject to tax sale. Any tax debt that is due to the state and has not been paid on time constitutes a lien in the favor of the state. The lien for the tax, including penalties and interest, arises at the time the tax is due.
Objections & Appeals
If you have received a Proposed Notice of Assessment it may indicate that you have additional taxes, penalties or interest due to the state. You have a right to object to the tax assessment within 30 days from the date the notice was mailed. After 30 days from date of mailing the notice, the proposed the tax assessment will become final.
Once the assessment becomes final, you will receive a Notice of Final Assessment. You may appeal the assessment to the review board or tax appeal court if you file the appeal within 30 days from the date the final notice was mailed.
If you have filed the appeal with the board of review, you have 30 days from the date of the board's decision to file an appeal to the decision with the tax appeal court.
If you have filed the appeal with the tax appeal court, the decision of the tax appeal court may then be appealed within 30 days to the Intermediate Appellate Court.
If you do not file your tax returns or statements on time, or do not pay your taxes to the State of Hawaii on time, additional penalties will be added to your tax liability.
Failure to file tax return: penalty will be 5% of the amount of tax if the failure to file is not more than one month. An additional 5% for each additional month, or fraction of a month, will be added, not to exceed 25%.
Failure to pay tax after timely filing of return: if you do not pay the full amount of tax due within 60 days of the timely filing, a penalty of up to 20%, as determined by the director, shall be added to your liability.
Underpayment due to fraud: if any of the unpaid tax is due to fraud, a penalty of up to 50% of the underpayment shall be added to your tax bill.
Underpayment due to negligence or disregard: any underpayment of tax due to negligence or disregard of the rules shall have a penalty of up to 25% of the underpayment.
You may be able to request a waiver of penalties if you can show that your failure to file a return or to pay on time was due to a reasonable cause such as circumstances beyond your control. Carelessness, neglect or disregard of the tax code, are not acceptable reasons for a penalty waiver.
Any person who is responsible for the collecting, accounting for, and paying over taxes, that fails to do so, may be held personally liable for the amount of tax debt.
Power of Attorney
You have the right to have an authorized person represent you regarding your tax matters. To designate a qualified agent to represent you before the Department of Taxation, you need to file Form N-848, State of Hawaii Power of Attorney.