Hawaii's deadline to file is Tuesday.
The traditional April 20 due date was unchanged despite the federal government extending its tax filing deadline to May 17 from April 15.
All other states that tax wages have extended their filing deadlines, often matching the new federal deadline and in some cases going beyond that into June or July. For many people, having to file Hawaii income tax returns by the usual due date is no big deal, other than not having extra time to procrastinate over what can be a despised chore. However, the unique decision by the state Department of Taxation to stick with its usual annual deadline could result in negative financial ramifications for some Hawaii taxpayers.
A representative of one local tax preparation service said many of its clients wrongly assumed Hawaii had extended its tax filing deadline because of the federal government's May 17 move, which led a progression of states to follow suit, and are now shocked to learn their taxes are due next week.
The Tax Department said Wednesday it had received almost 58 percent of individual income tax returns and doesn't have an estimate of how many returns it will receive by Tuesday.
At downtown Honolulu-based Tax Services of Hawaii, accountant Ken Gironda said business this year is like any other year because tax filers pretty much need to prepare their federal return to determine their adjusted gross income in order to file their state return.
This suggests that many Hawaii taxpayers are not taking advantage of the federal deadline extension.
"Our office is just as busy as ever, " Gironda said.
Under longstanding Hawaii Tax Department policy, income tax filers have an option of receiving an automatic six-month extension through Oct. 20 that requires no action.
But to avoid a stiff penalty, taxpayers opting for the extension must either be due a refund or pay, by Tuesday, a reasonably calculated estimate that turns out to be at least 90 percent of their actual tax obligation.
This year, making such an estimate can be more complicated for thousands of workers who received unemployment benefits if taxes were not withheld. Capital gains from stock investments also can make estimates challenging.
The penalty for not paying a proper amount of taxes by Tuesday is 5 percent per month on what is owed, with a 25 percent cap, plus monthly interest of 0.66 percent.
"Taxpayers who are not able to pay the properly estimated tax amount owed should pay as much as they can to avoid additional interest and penalties, " the Tax Department advises on its website.
The agency also notes that it has the authority to partly or fully waive penalties and interest, and can consider the enormous economic impacts on taxpayers caused by the pandemic.
Most Hawaii taxpayers receive state refunds. According to the most recent state data from 2018, refunds totaling about $550 million were issued, compared with about $130 million owed to the state from 739, 352 returns.
Given this split, most taxpayers have a beneficial financial interest not to opt for the automatic extension because the state owes them money.
"Thanks for the free loan, you babooze, " Tom Yamachika, president of the nonprofit Tax Foundation of Hawaii, jokingly described the state's view of taxpayers who delay filing when they are due refunds.
Yamachika said generally Hawaii taxpayers wouldn't have received a major benefit if the state pushed back the filing deadline by a month, and therefore the foundation didn't take issue with the state's decision.
Another factor the foundation considered is what it would have cost taxpayers for the state to reprogram computers to adjust the deadline for a relatively short period.
The Tax Department announced its decision March 24.
Alika Ke-Paloma, a spokesman for the agency, said factors considered included whether the Legislature would amend state law before May 17 in ways to conform with recent federal tax changes.
Other factors included the cost to reprogram computers to accommodate a deadline change and the need to adjust forms, instructions, interest, penalties and statute of limitations issues arising with an extension.
"The benefit of a 30-day extension of time to file did not outweigh the issues that it would cause considering there are other alternatives including the appropriate waivers of penalties and interest, " Ke-Paloma said in a statement.
Other states made different moves, sometimes because their tax laws by design must conform with federal tax law and they needed time to make such adjustments.
For instance, Maryland extended its deadline to July 15 from April 15 in part to adjust software programs and forms to achieve conformity."We've never before seen so many changes to the current year's tax code in the midst of the tax filing season, " Maryland Comptroller Peter Franchot said in a March 11 announcement. "We're realistic about the burden this puts on taxpayers, tax preparers and our staff, which is why I'm taking this emergency action."
The Iowa Department of Revenue extended its deadline to June 1 from April 30 in part to conform with federal tax law and to help residents whose lives have been disrupted by COVID-19.
Several states do not tax wages, including New Hampshire, which kept its April 15 deadline for taxpayers to file returns for interest and dividend income.
"We feel any extension to the April 15, 2021 due date, even by one month, risks causing confusion and does not offer meaningful relief to taxpayers who will still need to complete their 2020 tax return in order to calculate the estimated tax payment that continues to be due on April 15, 2021, " the agency explained.
Questions? The deadline to file Hawaii income tax returns is Tuesday, April 20. Hawaii tax officials urge anyone needing information about tax filings to contact their office at 587-4242 or toll-free at 1-800-222-3229.
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