Withholding Tax – For Employees
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. Form HW-3 (with HW-2s attached) is due annually on February 28.
Frequently Asked Questions (FAQs)
Q: How do I know if I am not subject to withholding?
A: To review the withholding requirements, use the Booklet A, Employer’s Tax Guide.
Q: What do I do when I am not subject to withholding?
A: If you think you should not be subject to withholding based on the guidelines in Booklet A, Employer’s Tax Guide, complete and submit the HW-6 form to your employer.
Q: My spouse is in the military, is withholding required on my wages?
A: Your wages may not be subject to withholding base on the “Military Spouses Residency Relief Act,” which states that wages, salaries, tips, commissions, and other compensation are NOT subject to withholding if all the following conditions are met:
1. The servicemember (a member of the uniformed services as defined in 10 U.S.C. section 101(a)(5)) is present in Hawaii solely in compliance with military or naval orders,
2. The spouse is in Hawaii solely to be with the servicemember, and
3. The spouse and the servicemember are domiciled in the same state and that state is not Hawaii.
Please read the guidelines in Booklet A, Employer’s Tax Guide, complete and submit the HW-6 form to your employer if you believe you are not subject to withholding.
Q: I don’t live in Hawaii full-time, am I considered a nonresident or part-year resident?
A: A Hawaii nonresident is an individual who is in Hawaii for a temporary or transient purpose, and whose permanent domicile is not Hawaii. A part-year resident is an individual who was a Hawaii resident for part of the year, and a nonresident of Hawaii during the other part of the year. Both nonresident and part-time residents will be taxed on all income from Hawaii sources only. Part-time residents will also be taxed on income for all sources during the period of residency.
Q: I received my Form HW-2 from my employer, what do I do with it?
A: You will need to use the information on the HW-2 to complete your Individual Income tax return (Form N-11 or Form N-15).
Q: I was working for a business and didn’t get a HW-2 or W-2 form. What am I supposed to do?
A: Contact your employer for your Form HW-2 (or IRS Form W-2). DOTAX cannot provide employees copies of the Form HW-2. You may also request a Form W-2 transcript from the IRS.
Q: I received my Form HW-4 from my employer, what do I do with it?
A: Before you can start working, you must give a completed Form HW-4 to your employer. Form HW-4 shows your withholding allowances, which are based on your personal exemption(s) and (standard or itemized) deductions. For more information and clarifications on withholding allowances, please see Booklet A Employer’s Tax Guide.
Q: How many withholding allowances can I claim?
A: The HW-4 form will help you calculate your withholding allowances. Do not claim more than what is accurate. A HW-4 form claiming more than 10 exemptions may be considered excessive and subject to review by DOTAX. Be advised that an employee may be subject to criminal penalties for the failure to supply a valid Form HW-4 as required or for submitting a false and fraudulent HW-4 form, Act 92 SLH 1995.
- Hawaii Revised Statutes Chapter 235, Sections -61 through -69
- Hawaii Administrative Rules Title 18, Chapter -235, Sections -61-67
Page Last Updated: March 17, 2020