Section 18-235-97 - Estimates; tax payments; returns(a) Definitions. For purposes of this section: "Tax" shall be defined as set forth in section 235-97, HRS.
"Taxpayer" means individuals, corporations (including corporations organized under subchapter S of the Internal Revenue Code of 1986), estates, and trusts, except where the taxpayer clearly refers to only one of the preceding.
(b) Filing of estimated tax. (1) In general. In general, every taxpayer (including S corporations), subject to taxation under chapter 235, HRS, shall submit estimated tax payments on a quarterly basis to the department. The estimated tax payments shall be accompanied by forms prescribed by the department. As provided in section 235-97(a)(2), HRS, where tax is withheld from wages or collected at the source, the amount of tax withheld or collected at the source shall be deducted from the total estimated tax liability of the taxpayer for the taxable year.(2) Exceptions. Estimated tax payments are not required if: (A) The taxpayer's estimated tax liability (after taking into account all taxes withheld or collected at the source) for the taxable year is less than $500; Example: R, a single individual, is employed as a carpenter. In 1993, R expects to earn $30,000 from which $2,300 in taxes will be withheld. During 1993, R also expects to earn $2,500 for carpentry performed for family and friends; no tax will be withheld.
Based on an estimated gross income of $32,500, less the standard deduction of $1,500 and personal exemption of $1,040, R's estimated taxable income is $29,960. R's estimated tax liability is $2,535.
Since the difference between R's estimated tax liability and the amount of tax withheld from R's salary is less than $500, R is not required to submit estimated tax for 1993.
(B) The taxpayer did not have any tax liability for the preceding taxable year; or(C) Pursuant to section 235-97(a)(6), HRS, the taxpayer is a foreign corporation which, under sections 235-21 to 235-39 or other provisions of chapter 235, HRS, attributes less than fifteen percent of the foreign corporation's business (entire gross income computed without regard to source) for the taxable year to the State. (3) Exemption for foreign corporation. If a foreign corporation is not required to submit estimated tax pursuant to section 235-97, HRS, and this section, the corporation shall apply for an exemption. The corporation shall submit two copies of a letter requesting an exemption from the payment of estimated tax under section 235-97(a)(6), HRS, to the department. Income tax returns from the preceding year, as well as other pertinent information, may be submitted along with the letter in support of the corporation's claim for exemption. A copy of the letter, stating whether the exemption is granted or denied, shall be returned to the taxpayer. If, after an exemption is issued, a foreign corporation's business activity (actual or expected) in the State increases, and the foreign corporation no longer qualifies for the exemption from section 235-97, HRS, the exemption from making estimated tax payments is automatically terminated. Upon termination, the corporation is required to submit estimated tax to the department pursuant to section 235-97, HRS, and this section. (c) Method of estimating tax liability; payment of estimated tax. (1) Method of estimating tax liability. In order to determine whether a taxpayer is required to make quarterly estimated tax payments, as provided in section 235-97, HRS, and this section, the taxpayer shall calculate the taxpayer's estimated tax liability for the taxable year. The taxpayer's estimated tax liability is calculated as follows: (A) Determine the taxpayer's estimated taxable income for the taxable year. The taxpayer's estimated taxable income is the taxpayer's anticipated gross income minus any reasonably expected deductions, including personal exemptions and the standard deduction.(B) Calculate the taxpayer's estimated tax liability. Based on the taxpayer's estimated taxable income, calculate the taxpayer's estimated tax liability for the taxable year using: the tax schedules set forth in section 235-51(a) to (c), HRS, for individuals; the tax schedule set forth in section 235-51(d), HRS, for estates and trusts; or the tax rates set forth in section 235-71, HRS, for corporations. Tax tables prescribed under section 235-53, HRS, may be used if appropriate.(C) Subtract any tax credits. Tax withheld from wages or collected at the source, or any overpayment from the immediately preceding year which the taxpayer elects to have applied against the current taxable year's tax liability shall be subtracted from the taxpayer's estimated tax liability as provided in this subsection. In addition, any estimated tax payments already made by the taxpayer for the current taxable year shall be subtracted from the taxpayer's estimated tax liability. If the taxpayer elects to have the preceding year's income tax overpayment credited to the current year's estimated tax liability, the taxpayer may allocate the overpayment amount either: to the first estimated tax payment, with any balance allocated to each successive quarterly payment until the overpayment amount is exhausted; or ratably allocate the overpayment amount to all estimated tax payments for the current taxable year.
If, after any available tax credit is subtracted from the estimated tax liability, the taxpayer's estimated tax liability is $500 or more, the taxpayer shall submit estimated tax payments on a quarterly basis pursuant to section 235-97, HRS, and this section.
(2) Change in application of overpayment; request for refund. In general, once a taxpayer elects to apply an overpayment to the current year's estimated tax liability or elects to receive a refund of the overpayment, the taxpayer may not revoke the election without first receiving permission from the director or designee. A request to change the application of the overpayment or request for a refund shall be made by submitting a letter to the department.(3) Deficiency and assessment. Pursuant to section 235-108, HRS, a taxpayer's return is subject to determination and assessment regardless of whether credit is taken for an overpayment of income tax from the immediately preceding taxable year. The allocation of a credit to the current year's estimated tax liability based on the overpayment amount does not preclude the finding of a deficiency for the taxable year in which the overpayment occurred. Moreover, if a taxpayer underpays any estimated tax payment, an addition to tax shall be added to the taxpayer's tax liability for the taxable year as provided in section 235-97(f), HRS.(4) Dispute over tax liability. If a taxpayer protests the validity of any provision of the law, rules, or instructions relating to the filing and submission of the taxpayer's income tax return, the taxpayer may not elect to allocate any overpayment amount to the estimated tax liability for the subsequent taxable year. The taxpayer must apply for a refund. If the taxpayer's income tax protest is not allowed by the director, an assessment for the taxable years at issue will first be made by the director. Any overpayment, if not previously refunded, shall be applied against the assessment. The assessment shall be subject to review and the amount involved subject to repayment to the taxpayer as provided by chapter 231, HRS.(d) Joint or separate filing of estimated tax by married taxpayers. (1) In general. A husband and wife may file estimated tax returns jointly even though they are not living together. However, a joint filing may not be made if the spouses are legally separated under a decree of divorce or of separate maintenance; one of the spouses is a nonresident alien, except as allowed under section 18-235-93; or the spouses have different taxable years. (A) Filing of estimated tax by married taxpayers. Married taxpayers may file estimated tax either separately or jointly, even if only one spouse has estimated tax liability; provided that if married taxpayers choose to file estimated tax separately, the spouses must both elect to either itemize their nonbusiness deductions or use the standard deduction in calculating their estimated tax liability.(B) Personal exemptions; married taxpayers filing estimated tax returns separately. For purposes of determining a taxpayer's separate estimated tax liability, the tax liability must be estimated without taking into consideration the exemptions of the taxpayer's spouse, unless the taxpayer's spouse has no gross income and is not claimed as a dependent of another taxpayer. Exemptions claimed for any children may only be claimed by the spouse who is qualified to claim the children as dependents, as provided in chapter 235, HRS. Where both spouses are qualified to claim the children as dependents, the spouses may agree as to which spouse may claim the children as dependents, or the spouses may equally divide the number of exemptions available; provided that the exemptions are not divided into fractional shares.
(C) Joint filing of estimated tax; consent to disclosure. The joint filing of an estimated tax return constitutes a consent by both spouses, that if payments of estimated tax are allocated pursuant to this rule, the amount of tax shown on the joint estimated tax return may be made known to the other spouse.(2) Payment of estimated tax filing of income tax returns. If married taxpayers file estimated tax returns separately, they shall not be precluded from filing a joint income tax return for the taxable year. If married taxpayers file their estimated tax return jointly, they shall not be precluded from filing separate income tax returns for the taxable year. In the case where a husband and wife jointly file their estimated tax return, but do not choose to file a joint income tax return for the same taxable year, the estimated tax payments made for the taxable year may be credited against the tax liability of either the husband or wife, or may be divided between them in such manner as they may agree. If a husband and wife fail to agree to a division of the estimated tax payments, the payments shall be allocated between them as follows: the portion of the estimated tax payments to be allocated to each spouse shall be based on the proportionate share each spouse's tax liability bears to the combined tax liability of the spouses.
(3) Death of spouse. (A) Joint filing of estimated tax. A joint filing of an estimated tax return may not be made after the death of a spouse. However, if it is reasonable for a surviving spouse to assume that a joint income tax return will be filed for the last taxable year of the deceased spouse, the surviving spouse may, if needed, make a separate filing of estimated tax for the taxable year in which the deceased spouse died. The surviving spouse may calculate taxable income on the aggregate taxable income of both spouses and the estimated tax liability may be computed as though estimated tax is filed jointly. If an estimated tax return is filed jointly by a husband and wife and thereafter one spouse dies, no further payments of estimated tax are required from the estate of the decedent for the period ending on the date of the decedent's death. The surviving spouse shall remain liable for any subsequent payments of estimated tax; the surviving spouse, however, may amend the filing and choose to report the estimated tax for the taxable year separately. If the surviving spouse chooses to file separately, the estimated tax shall be computed on the aggregate taxable income of both the surviving spouse and the deceased spouse; provided the surviving spouse files a joint income tax return for the deceased spouse's last taxable year.
(B) Amendment of the estimated tax filing. If a surviving spouse chooses to amend the estimated tax filing upon the death of a spouse, payments made pursuant to a joint filing by the spouses may be divided between the decedent and the surviving spouse in such proportion as the surviving spouse and the legal representative of the decedent may agree. If the surviving spouse and the legal representative of the decedent fail to agree to a division of the payments, the payments shall be allocated as follows: the portion of the estimated tax payments to be allocated to each spouse shall be based on the proportionate share each spouse's tax liability bears to the total tax liability of both spouses. Any overpayment made pursuant to the joint filing shall be allocated based on the taxpayer's proportionate share of the tax liability.(e) Time and place for filing estimated tax forms; payment of estimated tax liability.(1) Filing dates. The dates for filing the estimated tax returns prescribed by the department and for payment of the estimated tax are as follows: (A) Calendar year basis taxpayer. Unless a taxpayer chooses to submit the taxpayer's estimated tax liability in full at the time the first payment is due, estimated tax shall be made in four equal payments: one payment on or before April 20; one payment on or before June 20; one payment on or before September 20; and one payment on or before January 20 following the close of the taxable year.(B) Fiscal year basis taxpayers. Unless a taxpayer chooses to pay the taxpayer's estimated tax liability in full at the time the first payment is made, a fiscal year basis taxpayer shall file estimated tax on a schedule similar to a calendar year taxpayer. Fiscal year taxpayers shall make the first payment of estimated tax for the current taxable year on or before the twentieth day of the fourth month of the taxpayer's fiscal year. Thereafter, the remaining estimated tax payments shall be made on or before the twentieth day of the sixth and ninth months of the fiscal year, and the twentieth day of the first month following the close of the fiscal year.(2) Change of circumstances. If, after the due date for filing the first payment of estimated tax (April 20 for calendar year taxpayers, and the twentieth day of the fourth month for fiscal year taxpayers), a taxpayer who previously had not been required to file estimated tax is required to file estimated tax due to changed financial circumstances, the taxpayer shall file estimated tax on or before the next payment date. (A) Calendar year basis taxpayers. If the change in the taxpayer's financial circumstances which necessitates the filing of estimated tax returns occurs after March 31 but before June 1, estimated tax shall be submitted to the department in three equal payments. The first payment shall be submitted on or before June 20; the second payment shall be submitted on or before September 20; and the third payment shall be submitted on or before January 20 following the close of the calendar year. If the change in the taxpayer's financial circumstances which necessitates the filing of estimated tax returns occurs after May 31 but before September 1, estimated tax shall be submitted to the department in two equal payments. The first payment shall be submitted on or before September 20, and the second payment shall be submitted on or before January 20 following the close of the calendar year.
If, however, the change in the taxpayer's financial circumstances which necessitates the filing of estimated tax returns, occurs after August 31, the taxpayer may either: file an estimated tax return on or before January 20 following the close of the calendar year; or file the income tax return and submit any tax owed for the taxable year by January 31 following the close of the taxable year.
(B) Fiscal year basis taxpayers. If the change in the taxpayer's financial circumstances which necessitates the filing of estimated tax returns occurs after the last day of the third month but before the first day of the sixth month of the taxpayer's fiscal year, estimated tax shall be submitted to the department in three equal payments. The first payment shall be submitted on or before the twentieth day of the sixth month; the second payment shall be submitted on or before the twentieth day of the ninth month; and the third payment shall be submitted on or before the twentieth day of the first month following the close of the fiscal year. If the change in the taxpayer's financial circumstances which necessitates the filing of estimated tax returns occurs after the last day of the fifth month but before the first day of the ninth month of the fiscal year, estimated tax shall be submitted to the department in two equal payments. The first payment shall be submitted on or before the twentieth day of the ninth month; and the second payment shall be submitted on or before the twentieth day of the first month following the close of the fiscal year.
If, however, the change in the taxpayer's financial circumstances which necessitates the filing of estimated tax returns occurs after the last day of the eighth month of the fiscal year, the taxpayer may either: file an estimated tax return on or before the twentieth day of the first month following the close of the fiscal year; or file the income tax return and submit any tax owed for the taxable year by the last day of the first month following the close of the fiscal year.
(3) Place for filing estimated tax return; payment of estimated tax. Estimated tax returns as prescribed by the department and all estimated tax payments shall be filed with the director or designee in the taxation district in which the taxpayer expects to file an income tax return for the taxable year.(f) Death of taxpayer. If an individual taxpayer dies during the taxable year, additional payments of estimated tax with respect to that taxable year are not required by the taxpayer's estate subsequent to the date of death.(g) Payment of estimated tax in advance. At the election of the taxpayer, any payment of estimated tax may be made prior to the prescribed due date.(h) Amendment of the estimated tax calculation; change in payment amount. (1) Pursuant to section 235-97(e), HRS, a taxpayer may recalculate the taxpayer's estimated tax liability. If a taxpayer's financial circumstances change such that it requires the taxpayer to either increase or decrease the amount of the taxpayer's estimated tax payments, the taxpayer shall recalculate the taxpayer's estimated tax liability for the taxable year. The recomputed tax liability then shall be reduced by any estimated tax payments already made for the taxable year. The balance of the estimated tax liability owed for the taxable year shall be divided equally among the remaining quarterly payment periods; the payments shall be ratably increased or decreased to reflect the estimated increase or decrease in the estimated tax liability. If an amendment is made after September 20 for calendar year taxpayers, or after the twentieth day of the ninth month of the fiscal year for fiscal year taxpayers, any increase in the estimated tax liability shall be paid at the time the amendment is made.(2) Filing income tax return on or before January 31; individuals. If an individual calendar year taxpayer files an income tax return for the taxable year on or before January 31 following the close of the taxable year (or on or before the last day of the first month following the close of the fiscal year for fiscal year taxpayers), and the individual taxpayer pays any tax liability owed on the return in full, then the individual taxpayer shall not be assessed any addition to tax with respect to any underpayment of the fourth quarter estimated tax payment of the taxable year. The filing of the income tax return on or before January 31 (or on or before the last day of the first month following the close of the fiscal year for fiscal taxpayers) shall be considered the individual taxpayer's fourth quarter estimated tax filing.(i) Filing estimated tax form; short taxable years.(1) In general. For purposes of this subsection, federal Treasury Regulations sections 1.6654-3 and 1.6655-3 (regarding short taxable years), shall apply. An estimated tax form and payment for a short taxable year shall be filed if, with the approval of the director, there is a change in the taxpayer's accounting period from one taxable year to another, resulting in a short taxable year. The filing of an estimated tax form, however, is not required if the short taxable year is: (A) A period of less than four months; or(B) A period of less than six months, and the circumstances necessitating the filing of estimated tax returns first occur after the first day of the fourth month; or(C) A period of less than nine months, and the circumstances necessitating the filing of estimated tax returns first occur after the first day of the sixth month; or(D) A period of nine months or more and the circumstances necessitating the filing of estimated tax returns first occur after the first day of the ninth month.(2) Time for filing estimated tax return and payment of estimated tax. The filing of the estimated tax return and payment of estimated tax for a short taxable year shall follow the same schedule as for a full twelve month calendar or fiscal year as set forth in subsection (e); except that in no event shall the payment of estimated tax in full be later than the twentieth day of the first month following the close the short taxable year. The number of payments for a short taxable year shall be determined as follows:(A) Determine the number of payment dates which occur in the short taxable year (i.e., the twentieth day of the fourth, sixth and ninth months, if any, of the short taxable year, or any payment dates which occur after any change in circumstances which necessitate the filing of estimated tax; and(B) Add, as another payment date, the twentieth day of the first month of the taxable year following the close of the short taxable year. In order to calculate the amount of each payment, the taxpayer should divide the total estimated tax liability for the short taxable year by the number of payment dates.
(3) Use of annual basis. In the case of a short taxable year, for the purpose of determining whether the taxpayer is required to submit an estimated tax return and estimated tax, the taxpayer's income shall be calculated on an annual basis.(j) Addition to tax related to underpayment of estimated tax. The director of taxation may waive any addition to tax related to the underpayment of estimated tax pursuant to section 235-97(f)(4), HRS, and as set forth in section 6654(e)(3) of the Internal Revenue Code of 1986.[Eff 2/16/82; am 1/1/94; am 10/13/94] (Auth: HRS §§ 231-3(9), 235-97(a), 235-118) (Imp: HRS § 235-97)