Overview
Employers need to withhold Hawaii income taxes on employee wages. Employers then pay the withheld taxes to the State of Hawaii, Department of Taxation (DOTAX). Employees reconcile their withholding taxes paid as part of their Individual Income tax return. Withholding is required on:
(a) Wages for services performed in the State.
(b) Wages for services performed outside the State if:
1. The services are performed by an employee whose regular place of employment for services for the employer is in the State; OR
2. The wages are paid out of an office in the State or a field office of an employer whose head office is in the State.
Federal withholding rates are subject to change by the IRS. For information on Hawaii rates, please refer to the Appendix of Booklet A, Employer’s Tax Guide for tax withholding rates and tables.
All withholding taxpayers need to file returns quarterly (due April 15, July 15, October 15, and January 15) using Form HW-14. If changes need to be made to a return already submitted, please file an amended return for that filing period.
Reminder for W-2 or HW-2 Submittal
Beginning Tax Year 2020, the Form HW-3, Employer’s Return and Reconciliation of Hawaii Income Tax Withheld from Wages, is not required. Form HW-30, a simple transmittal for W-2 or HW-2 forms, is only required for paper submissions of W-2 or HW-2 forms.
Effective January 1, 2022, Form W-2/HW-2 must be filed with the Department of Taxation (Department) and furnished to the employee no later than January 31st following the close of the calendar year. Please see Tax Announcement 2021-08 for more details.
Taxpayers using Hawaii Tax Online will be asked to submit the W-2 or HW-2 forms by (1) manually entering the data into the web form, (2) using simple file upload with Excel, or (3) upload using the bulk filing system (a.k.a., FSET).
Booklet A Employer’s Tax Guide (Rev. 2022) 58 pages, 446 KB, 11/23/2022
Frequently Asked Questions (FAQs)
General
How do I get a withholding (WH) account number?
Use Form BB-1 to request a withholding (WH) account number. You may also add a withholding account on Hawaii Tax Online if you already have a login.
How much does it cost to obtain a Withholding account?
There is no fee to open a withholding account.
Can I e-pay or e-file my returns?
Absolutely! All taxpayers are encouraged to e-file or e-pay to ensure that transactions are posted quickly and accurately.
Do I need to issue employees Form W-2/HW-2?
Yes, issue employees Form W-2 or HW-2 by January 31 and submit a copy of the Form W-2 or HW-2 information to DOTAX by February 28 using Form HW-3.
What’s the difference between IRS Form W-2 and Hawaii Form HW-2?
The forms are essentially the same. Either can be issued to your employees. DOTAX accepts the IRS Form W-2 or our Form HW-2.
Why do I have two (2) withholding tax account numbers, one with an “R” at the end?
Each withholding taxpayer has two tax numbers:
- WH-###-###-####-01 is the withholding periodic account.
- WH-###-###-####-01R is the withholding annual/reconciliation account.
The account is generally referred to without the “R” at the end. The account with the “R” at the end is used to reconcile your withholding accounts annually. [NOTE: Taxpayers who open a withholding account after January 1, 2020 will only have one tax number. No “R” account will be assigned.]
If I hire seasonal, part-time, and full-time employees in the State of Hawaii, do I need to withhold taxes for all types of employees?
Yes. Any payment of wages to employees may be subject to withholding tax. Please refer to Booklet A, Employer’s Tax Guide (Revision 2017) for more information on withholding requirements.
Return Filing
IMPORTANT: Return due dates are different from payment due dates.
How do I e-file my returns?
E-file your returns using Hawaii Tax Online or for uploading bulk files, you may set up a secure file transmission (FSET). For assistance with setting up FSET, please complete and submit Form EF-2, Hawaii Bulk Filing System Registration.
Do I need to e-file my returns?
For taxable periods beginning on or after January 1, 2020, taxpayers whose withholding tax liability exceeds $40,000 annually must e-file. Failure to comply with this requirement will result in a penalty of two percent (2%) of the amount of tax required to be shown on the return. Tax Announcement 2019-11: Mandatory electronic filing of withholding tax returns for employers whose annual liability exceeds $40,000 AMENDED
I’ve made a mistake on my return, what do I do?
If you make a mistake on your return, you can file an amended return.
If my business operates on a fiscal year, can I file withholding returns according to my quarterly schedule?
No. All withholding taxes are filed on a set quarterly (calendar year) schedule.
Can I get an extension of the return filing due date?
Submit Form HW-26 to request approval of an extension for the filing of Form HW-3 and its associated Form HW-2s. Form HW-26 is only an extension of time to file, not an extension of time to pay. You must indicate a reason for the extension request. Your request will only be granted for a period of 60 days or less and is subject to approval.
What if I file a return late?
Penalty and interest will be assessed.
Payments
IMPORTANT: Payment due dates are different from return due dates.
How do I e-pay withholding tax?
You can use Hawaii Tax Online to make a payment (1) from your checking or saving account (free) or (2) using a credit or debit card payment (fees apply).
Am I required to make e-payments?
Taxpayers with withholding tax liabilities over $40,000 must e-pay. Failure to meet this requirement will result in the assessment of a two percent (2%) penalty of the amount of tax required to be shown on the return.
When do I need to pay withholding tax?
Payment frequency depends on your withholding tax liability:
| Withholding tax liability | Payment frequency | Due date |
|---|---|---|
| Greater than $40,000 | Semi-weekly | Wednesday: If taxes are withheld for wages paid the immediately preceding Wed, Th, or Friday Friday: If taxes are withheld for wages paid the preceding Saturday, Sunday, Monday, or Tuesday |
| $5,000 – $40,000 | Monthly | 15th day of the month following the close of the preceding monthly period |
| Less than $5,000 | Quarterly | 15th day of the month following the close of the preceding quarter (April 15, July 15, October 15, January 15) |
What if I pay late?
Penalty and interest will be assessed.
How do I get a refund of an overpayment?
You may use Form HW-14 to reconcile your tax due and payments quarterly.
If I pay my withholding tax throughout the year, do I still need to file a return?
Both returns and payments are required. If you do not file a return, your payment may not be posted to your account properly. A return is needed to completely post your payment to your withholding account.
Other FAQs
What should I do if an employee fails or refuses to complete a HW-4 form?
If you do not receive a Form HW-4 from an employee, you must withhold the tax as if the employee is single and claiming zero exemptions.
What do I do if an employee has claimed excessive withholding allowances (10 or more exemptions) or has misstated information on their HW-4?
Please send a copy of the Form HW-4 for that employee to the Tax Assessor in the district office where you file your withholding tax returns. For more information relating to withholding allowances see Tax Information Release No. 95- 4.
Can I be audited for withholding taxes?
Yes.
As a business owner, am I personally liable for withholding tax debt?
A: Yes. If an employer fails, neglects, or refuses to deduct and withhold form the wages paid to an employee, the employer will be liable to pay the amount of tax to the State.
References:
- Hawaii Revised Statutes Chapter 235, Sections -61 through -69
- Hawaii Administrative Rules Title 18, Chapter -235, Sections -61-67
- Tax Announcement 2019- 11 AMENDED
- Booklet A Employer’s Tax Guide (Rev. 2022) 58 pages, 446 KB, 11/23/2022
Page Last Updated: August 11, 2022
FAQs
What if I don t think my employer is withholding enough taxes? ›
If your employer didn't withhold the correct amount of federal tax, contact your employer to have the correct amount withheld for the future. When you file your return, you'll owe the amounts your employer should have withheld during the year as unpaid taxes.
Why is my withholding not enough? ›Having too little withheld from your paychecks could mean an unexpected tax bill or even a penalty for underpayment. If you have a side job that doesn't have any tax withholding, you could submit a new W-4 to adjust the withholdings at your main job to account for the increase in income.
How do I make sure I'm withholding enough taxes? ›Use the Tax Withholding Estimator on IRS.gov. The Tax Withholding Estimator works for most employees by helping them determine whether they need to give their employer a new Form W-4. They can use their results from the estimator to help fill out the form and adjust their income tax withholding.
Should I answer yes or no to higher withholding? ›Choosing “Yes” will result in a higher amount of tax withholding. This may be necessary if your spouse also works or if you hold multiple jobs or sources of income. The correct amount of withholding should consider all income earned by both you and your spouse. Please see Step 2 of the W-4 form for more information.
What happens if your employer messes up your w4? ›In most cases, you still owe the taxes to the IRS even if your employer or payroll department was the one who messed up by not withholding enough taxes during the year. The one exception is if your employer either intentionally or accidentally misclassified you as an independent contractor when you are an employee.
What can I do if my employer messed up my taxes? ›What should I do? If by the end of February, your Form W-2, Wage and Tax Statement has not been corrected by your employer after you attempted to have your employer or payer issue a corrected form, you can request that an IRS representative initiate a Form W-2 complaint.
Is it better to claim 1 or 0 on your taxes? ›By placing a “0” on line 5, you are indicating that you want the most amount of tax taken out of your pay each pay period. If you wish to claim 1 for yourself instead, then less tax is taken out of your pay each pay period.
How much of your paycheck should you withhold for taxes? ›Employers should withhold half (7.65%) of the 15.3% owed in FICA (Social Security and Medicare) taxes from an employee's gross pay. FICA taxes come in addition to regular federal income taxes, which change depending on your income level. There are seven tax brackets in 2022 and 2023: 12%. 22%, 24%, 32%, 35%, and 37%.
How do employers determine how much to withhold? ›To calculate tax withholding amount, employers determine the number of allowances employees claim on their IRS Form W-4 (Employee's Withholding Allowance Certificate) and refer to the income tax withholding tables provided by the IRS in Publication 15 which give ranges based on pay frequency, filing status and ...
What are 3 things that the amount of withholding tax depends on? ›Your federal income tax withholding from your pay depends on: The filing status shown on your W-4 form. The number of dependents or allowances specified, and. Other income and adjustments on the Form W-4 you filed with your employer.
What do you claim to withhold the most taxes? ›
Claiming 0 Allowances on your W4 ensures the maximum amount of taxes are withheld from each paycheck. Plus, you'll most likely get a refund back at tax time.
What should I put for extra withholding? ›You Can Set Up Extra Withholding for Non-Wage Income
Just put the estimated total amount of this income for the year on Line 4(a) of your W-4 form and your employer will calculate the proper withholding amount for each pay period. In most cases, you won't have to submit estimated tax payments for this income.
Claiming 1 allowance is typically a good idea if you are single and you only have one job. You should claim 1 allowance if you are married and filing jointly. If you are filing as the head of the household, then you would also claim 1 allowance. You will likely be getting a refund back come tax time.
Can you get in trouble for filling out w4 wrong? ›Filling the W-4 form out incorrectly can trigger an IRS penalty for underpayment (TRUE). Your employer will use the information you provide on Form W-4 to determine the amount of Federal income tax to withhold from your pay.
Why do I get taxed more than my coworker? ›Tax credits and cut off points are issued by the Revenue based on an individual's own personal circumstances which will vary between employees. They may have worked more hours in the previous periods or even in the current period than their colleagues.
Can your employer change your tax withholdings at any time? ›Once a lock-in rate is effective, an employer cannot decrease withholding unless approved by the IRS.
Can an employer get in trouble for not withholding federal taxes? ›Penalties. Failure to do so will get the attention of the IRS and can result in civil and even criminal penalties. Sometimes the failure to pay is an oversight or a lack of understanding of what legal duties exist.
Who gets in trouble if taxes are done wrong? ›You cannot go to jail for making a mistake or filing your tax return incorrectly. However, if your taxes are wrong by design and you intentionally leave off items that should be included, the IRS can look at that action as fraudulent, and a criminal suit can be instituted against you.
Can I still get a refund if no federal taxes were withheld? ›Can I get a refund if I don't pay taxes? It's possible. If you do not have any federal tax withheld from your paycheck, your tax credits and deductions could still be greater than any taxes you owe. This would result in you being eligible for a refund.
Is claiming 0 enough? ›Claiming 0 allowances means that too much money will be withheld by the IRS. The allowances you can claim vary from situation to situation. If you are married with a kid, you can claim up to three allowances. If you want a higher tax return, you can claim 0 allowances.
How do I fill out a w4 to get more money on my paycheck? ›
It's simple -- just enter the extra amount you want withheld from each paycheck on line 4(c) of your W-4 form. The line is marked "Extra withholding." To request more money be withheld from your paycheck, enter the amount into line 4(c) of the W-4 form.
Is claiming 2 better than 0 on taxes? ›Claiming 1 on your tax return reduces withholdings with each paycheck, which means you make more money on a week-to-week basis. When you claim 0 allowances, the IRS withholds more money each paycheck but you get a larger tax return.
Why do I still owe taxes if I claim 0? ›Why do you still owe taxes if you claimed zero? There are a few reasons why you would still owe money if you have claimed zero on your tax forms. Some reasons are if you have additional income, have a spouse that earns income or if you earn bonuses or commissions.
What is tax withholding for dummies? ›Tax withholding is when your employer keeps some of your salary out of your paycheck and pays your taxes on your behalf. Your employer decides how much money to withhold from your paycheck based on the information you share on tax forms.
What is withholding tax example? ›Withholding refers to the money an employer holds back from a taxpayer's earnings. Employers pay tax withholdings to the federal and sometimes state government on their employees' behalf. Examples of employment taxes that are withheld include federal income taxes, Social Security taxes and Medicare taxes.
What are withholding allowances for dummies? ›A withholding allowance is an exemption that lowers the amount of income tax you must deduct from an employee's paycheck. A larger number of withholding allowances means smaller income tax deductions, and a smaller number of allowances means larger income tax deductions.
Is it better to claim more or less on w4? ›Claiming fewer allowances on Form w-4 will result in more tax being withheld from your paychecks and less take-home pay. This might result in a larger tax refund. On the other hand, claiming too many allowances could mean that not enough tax is withheld during the year.
How much tax should my employer withhold? ›Employers should withhold half (7.65%) of the 15.3% owed in FICA (Social Security and Medicare) taxes from an employee's gross pay. FICA taxes come in addition to regular federal income taxes, which change depending on your income level. There are seven tax brackets in 2022 and 2023: 12%. 22%, 24%, 32%, 35%, and 37%.
How much federal taxes should be withheld? ›| Tax rate | Single Filers | Head of Household |
|---|---|---|
| 10% | $0 to $9,950 | $0 to $14,200 |
| 12% | $9,951 to $40,525 | $14,201 to $54,200 |
| 22% | $40,526 to $86,375 | $54,201 to $86,350 |
| 24% | $86,376 to $164,925 | $86,351 to $164,900 |
Federal Insurance Contribution Act (FICA) taxes support the federal Social Security and Medicare programs. The total due every pay period is 15.3% of an individual's wages – half of which is paid by the employee and the other half by the employer.
How much federal tax should be withheld on $1000? ›
For example, a married employee who made $1,000 on a weekly pay period and claimed two withholding allowances would have $66 in federal income tax withheld from his or her paycheck.
How much federal tax should be withheld on $40 000? ›Marginal or Effective Income Tax Rate
In one example, if your 2022 income is $40,000 and your filing status is single, your first $10,275 will be taxed at 10%. Every dollar from $10,276 to $41,775 will be taxed at $1,027 (10% of $10,275) plus 12% within the bracket (in this case, around $3,800).
The purpose of withholding tax is to ensure that employees comfortably pay whatever income tax they owe. It maintains the pay-as-you-go tax collection system in the United States. It fights tax evasion as well as the need to send taxpayers big, unaffordable tax bills at the end of the tax year.