It’s that time again: Help the tax department help you

Posted on Feb 27, 2017 in Featured

State tax department staffers handle thousands of income tax returns each year.

When you have to process paperwork from more than 700,000 income tax filers, even the smallest details matter. So what can people do to expedite their returns?

The advice from Damien Elefante, deputy director of the state tax department, is simple but important to avoid delays:

• File electronically to expedite processing
• Double-check important numbers such as Social Security and bank accounts to make sure they’re listed correctly
• For paper filers – type information when possible because scanners (and staff) may not be able to decipher handwriting. Also, make sure that the tax return is signed by the appropriate individual(s), that appropriate schedules and W2(s) are attached, and if payment is required, make sure the check is written to “Hawaii State Tax Collector.”

The state is currently in the third of five phases of its Tax System Modernization (TSM) to improve operations and taxpayer services. New online features will be rolled out each year until all tax types are upgraded by 2020. The department also has new tools to help protect against fraud and identify when businesses and individuals aren’t paying taxes.

The modernization project is a massive undertaking, and like any transition, taxpayers are adjusting to the changes. But for business taxes, early feedback from several tax practitioners has been positive, said Elefante.“Tax professionals say they like the new system. Account information from past years is available to them and there’s no fee. Tax practitioners have access to all their clients, and processing times have gotten a lot faster.” The department has also added a staff specialist to help registered tax practitioners with account issues.

A recurring issue concerns the state collecting taxes from sales by online vendors. After a victory by the Attorney General’s Office in 2015, Hawai‘i courts ordered online travel companies such as Expedia and Travelocity to pay $53.1 million in back taxes to the state. As for online companies such as Amazon, some states have reached voluntary agreements for Amazon to collect taxes for those states. Bills being considered by Hawai‘i’s Legislature this session are patterned after those passed by states such as Colorado and Alabama. Although individual online buyers are technically required to report their online purchases and pay taxes on them, very few people actually do.

“The policy is in flux because of all these factors on the federal and state level,” said Elefante. “The department is evaluating all options to determine how to proceed. Online retailing has skyrocketed over the last several years, and all states have struggled to keep up with the collection of taxes from retailers that usually aren’t located in the state. Since Hawai‘i  is such a small state, it doesn’t make sense for us to engage in protracted litigation to collect taxes owed. Instead, the department is looking for the most efficient method to collect our share of taxes without overburdening our residents.”

 

Read more in our March issue.