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Posted on Sunday, January 13, 2002
State taxes
• State tax dept. tips
Advertiser Staff and News Services
The filing deadline may be three months away, but Hawai'i residents soon will begin receiving state tax forms and instruction packets in the mail.
Among some of the things residents will find:
- A $1 general income tax credit is now available for resident taxpayers.
- New tax credits including a hotel construction and remodeling tax credit; a technology infrastructure renovation tax credit; drought mitigating water storage facility income tax credit; credit for school repair and maintenance; and the residential construction and remodeling tax credit.
- Some electronic filing: For filing a state tax return electronically, residents can go to www.state.hi.us/tax/ebiz.html and look for the link to “approved software developer listing” to find a software that is compatible with individual systems.
- Some income tax forms and payments can be made through the Internet. For example, the state form for estimated income tax for individuals is available on a state website that has security and safeguard features to protect confidential tax information. More information is available on the state of Hawai'i’s Internet portal at www.ehawaiigov.org
- Forms can be obtained by fax or mail, 24 hours a day, 7 days a week by calling 587-7572 on Oahu, or toll-free from the Neighbor Islands at 1-800-222-7572. Mailing generally takes five working days; faxing generally is within 24 hours.
- Free tax preparation services are available at the Oahu District Tax Office through April 22 for taxpayers filing the short-form resident income tax return. The service is available Mondays through Fridays, except state holidays, on a first-come, first-served basis from 8 a.m. to noon at the Princess Keelikolani Building, 830 Punchbowl St., Room 124.
And while residents grapple with tax filings for 2001, there are other issues facing savers for the 2002 tax year, including new federal legislation that increases the amount individuals can invest in tax-favored retirement and education savings plans.
While the federal law took effect Jan. 1, some states — including Hawai'i — have laws that conflict with the increased federal savings limits for 401(k), individual retirement accounts and other tax-friendly savings plans.
This can become a problem for some. For example, the federal law boosts the maximum you can contribute to an IRA to $3,000, up from $2,000 in 2001. But if you contribute $3,000 to a deductible IRA and your state doesn’t change its laws, you could end up owing taxes on the $1,000. You could also owe a penalty.
Hawai‘i may yet adopt the federal policy when the 2002 legislative session begins this week.
“Some of the states just automatically adopt what the feds do,” said Grant Tanimoto, a representative for the state tax department.
But Hawai‘i has not always done this, despite a conformity bill passed in 1978 that is supposed to minimize the differences between federal and state tax law in Hawai‘i.
Lowell Kalapa, president of the Tax Foundation of Hawaii, believes the legislature and governor should pass these tax-favored retirement and education savings plans. But he’s not convinced that will happen. The reason? The state is in financial trouble, and this would mean less income from state taxes.
“The kicker in the bucket this year is that many provisions are going to cost substantial amounts of money,” said Kalapa, “and the legislature and the governor may be tempted not to pick up those provisions.”
The good news: Experts say that if states enact conforming laws, they will likely be retroactive to Jan. 1. That means you’ll still be able to take advantage of the higher limits before the end of the year. And in the case of IRAs, you can make contributions for 2002 until April 2003.
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