(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.
