HAR §18-235-61. Amended and renumbered §18-235-61-01 to §18-235-61-14

[10/13/94] §18-235-61-01 Deduction and withholding of income tax; in general. Section 235-61, HRS, and sections 18-235-61-01 to 18-235-61-14 relate to the deduction and withholding of income tax from remuneration paid for or attributable to services of an employee. These rules supplement sections 235-61 to 235-67, HRS. [Eff 2/16/82; am and ren §18-235-61-01 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-02 Definitions. For purposes of section 235-61, HRS, and sections 18-235-61-01 to 18- 235-61-14: “Employee” shall be defined as set forth in section 235-61(a), HRS. “Employer” shall be defined as set forth in section 235-61(a), HRS, and includes an individual who is self-employed during the taxable year. “Miscellaneous payroll period” means a payroll period other than a daily, weekly, biweekly (or other multiple of a week), semimonthly, monthly, quarterly, semiannual, or annual payroll period. The payroll period is to be used in determining the amount of tax to be withheld, except as otherwise provided in section 235-61, HRS, and sections 18-235-61-01 to 18-235-61-14. “Payroll period” means the period of service for which a payment of wages is ordinarily made by an employer to an employee. The payroll period is to be used in determining the amount of tax to be withheld, except as otherwise provided in section 235-61, HRS, and sections 18-235-61-01 to 18-235-61-14. “Remuneration” includes all payments, whether in cash or in a medium other than cash, for services rendered in the course of the employer’s trade or business. “Resident” shall be defined as set forth in section 235-1, HRS. “Wages” shall be defined as set forth in section 235-61(a), HRS. [Eff 2/16/82; am and ren §18-235-61-02 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-03 Wages subject to withholding. (a) An employer shall deduct and withhold tax from wages paid to an employee for services rendered, unless otherwise provided in section 235-61, HRS, and sections 18-235-61-01 to 18-235-61-14. Wages earned by a self-employed individual, however, are not subject to withholding under section 235-61, HRS, and sections 18-235-61-01 to 18-235-61-14. An exemption from withholding does not automatically exempt income from income taxation. (b) Exceptions. (1) An employer shall not withhold tax from income which is excluded from gross income pursuant to sections 235-2.3 and 235-7, HRS. For example, an employer shall not withhold tax from: (A) The rights, benefits, and other income, received under the state retirement system, exempted pursuant to section 88-91, HRS, or any comparable rights, benefits, and other income received under any other public retirement system. (B) Any compensation received in the form of a pension for past services rendered. (C) Remuneration paid to a patient affected with Hansen’s disease, employed by the State, in any hospital, settlement, or place for the treatment of Hansen’s disease. (D) The first $1,750 received by each member of the reserve components of the Army, Navy, Air Force, Marine Corps, or Coast Guard of the United States of America, and the Hawaii national guard as compensation for performance of duty. Compensation in excess of $1,750 shall be subject to withholding and shall be reported on the income tax return of the recipient. With respect to payments which are excluded from income pursuant to section 235-7(a) (1), (5), and (6), HRS, the employer shall withhold tax from the payments to the employee unless the employer or employee presents evidence regarding the exclusion and obtains a ruling from the department exempting the income from the withholding requirements of section 235-61, HRS, and sections 18-235-61-01 to 18-235-61-14. HRS §235-61 HRS §235-61 HRS §235-61(e) §18-235-61-03 INCOME TAX LAW 235- 108 (Unofficial Compilation as of 12/31/2025) (2) Additionally, the director finds withholding from the following payments to be unduly onerous or impracticable of enforcement. Therefore, an employer shall not withhold tax from the following payments: (A) Compensation paid as a weekly benefit for unemployment up to but not in excess of the amount provided by the federal Employment Security Law. Limitations applicable to payments from federal or state treasury funds or accounts shall apply to payments by an employer, trust, or other means provided by an employer. Although not subject to withholding, unemployment benefits shall be reported on the income tax return of the recipient. (B) Payments to or on behalf of an employee or the employee’s beneficiary, or from or to a trust created pursuant to section 401, IRC, (qualified pension, profit-sharing, and stock bonus plans), except where the payment is made to an employee of the trust as remuneration for services rendered as an employee and not as a beneficiary of the trust. Additionally, payments to or on behalf of an employee or the employee’s beneficiary, under or to an annuity plan as described in section 403(a), IRC, shall not be subject to withholding. Although not subject to withholding, payments subject to this paragraph shall be reported on the income tax return of the recipient. (C) The fair market value of meals and lodging furnished to an employee, provided, the lodging is required as a condition of employment. Although not subject to withholding, the fair market value of meals and lodging subject to this paragraph shall be reported on the income tax return of the recipient. (D) Wages paid to the estate or beneficiary of a deceased employee, who dies before the date for payment of wages. Wage payments, however, are includable in the income tax return of the estate or beneficiary who acquires the right to receive the wage payments due to the employee’s death, unless the payments are wages includable in the income tax return of the decedent. (E) Amounts paid to a person who is blind, deaf, or totally disabled, whose disability has been certified to as set forth in section 235-1, HRS. This paragraph applies to the first payroll period ending, or first payment of wages made without regard to a payroll period, on or after the date the certificate is presented to the employer. Thereafter, the exemption applies to all payroll periods and payments unless re-examination shows that the taxpayer no longer qualifies as a person who is blind, deaf, or totally disabled. If the taxpayer no longer qualifies for the exclusion under this paragraph, the existing certificate allowing for the exclusion from withholding shall be treated in the following manner: (i) If the date of the re-examination is after June 30 and before January 1, withholding is not required for the entire calendar year in which the re- examination occurred; or (ii) If the date of the re-examination is between January 1 but before July 1, withholding is required as of July 1. Although withholding is not required upon the wages of a person who is blind, deaf, or totally disabled, if the conditions set forth in this paragraph are met, the employer must provide the employee and the director or designee a Form HW-2 showing the total wages and other required information. The employer shall report the information in the same manner as in the case of an employee whose withholding exemptions exceed the amount of wages subject to withholding. Additionally, the wages of a person who is blind, deaf, or totally disabled must be included on Forms HW-14 and HW-3 filed by the employer. Although not subject to withholding, payments subject to this paragraph shall be reported on the income tax return of the recipient. (F) Fees paid by persons other than the government or a government agency, and to public officials for the performance of their duties (such as fees paid to notaries and sheriffs). Although not subject to withholding, fees subject to this paragraph shall be reported on the income tax return of the recipient. (G) Per diem amounts, mileage reimbursements, or fees paid to jurors and witnesses, or to public officials providing a temporary and nonrecurring service or who serve not more than once a year (i.e., election officials). Although not subject to withholding, fees subject to this paragraph shall be reported on the income tax return of the recipient. (H) Remuneration for services performed by an individual under the age of eighteen in the delivery or distribution of newspapers or shopping news, excluding delivery or INCOME TAX LAW §18-235-61-03 235- 109 (Unofficial Compilation as of 12/31/2025) distribution to a place for subsequent delivery or distribution. Although not subject to withholding, remuneration subject to this paragraph shall be reported on the income tax return of the recipient. (I) Remuneration for services performed by an individual in and at the time of the sale of newspapers or magazines to consumers, where compensation is based on the retention of the balance of the fixed price at which the newspapers are sold less the cost of the newspapers or magazines to the individual (whether or not the individual is guaranteed a minimum amount of compensation or is credited for any unsold newspapers or magazines returned). Although not subject to withholding, remuneration subject to this paragraph shall be reported on the income tax return of the recipient. (J) Tips or gratuities in any medium other than cash, or cash tips of less than $20 in any calendar month, received by an employee in the course of employment by an employer. If an employee receives tips or gratuities of $20 or more in any calendar month and the employee is required to furnish the employer a statement of tips or gratuities received under section 6053 of the IRC (with respect to reporting of tips), withholding shall be required. Whether or not withholding is required on tips or gratuities under this paragraph, all tips or gratuities shall be reported on the income tax return of the recipient. (K) Cash remuneration for casual services not in the course of an employer’s trade or business, including domestic services, of less than $50 per calendar quarter. If an individual, who is regularly employed by an employer, also performs casual services not in the course of trade or business and is paid $50 or more per calendar quarter for the services, then the remuneration shall be subject to withholding. Whether or not subject to withholding, remuneration subject to this paragraph shall be reported on the income tax return of the recipient. For purposes of this paragraph, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if: (i) On each of some twenty-four days during the quarter, the employee performs services for the employer which are not in the course of the employer’s trade or business during some portion of the day; or (ii) The employee is regularly employed by the employer in the performance of the service during the preceding calendar quarter. (L) Remuneration for services performed by an officer or member of the crew aboard a vessel engaged in foreign, interstate, intercoastal, coastwide, or noncontiguous trade, including an officer or member of the crew of an airplane traveling between points in the State and points outside the State. An officer or member of a crew on a vessel in the coastwide trade between ports within the State, however, may reach a voluntary agreement with the employer to have tax withheld. Although not subject to withholding, remuneration for services performed by officers and crew members shall be reported on the recipient’s respective state income tax return subject to section 235- 7(a)(8), HRS. (M) Noncash remuneration not in the course of trade or business. Remuneration for services not in the course of an employer’s trade or business, including domestic services, to the extent paid in any medium other than cash. Unless otherwise provided in this section, the fair market value of the remuneration shall be stated separately on Form HW-2 or forms prescribed by the department. Although not subject to withholding, remuneration subject to this paragraph shall be reported on the income tax return of the recipient. (N) Expense, allowances, etc. Amounts paid, either as advances or reimbursements, for traveling or other bona fide ordinary and necessary expenses incurred or reasonably expected to be incurred in the business of the employer. To be excluded from withholding under sections 18-235-61-01 to 18-235-61-14, the traveling and other reimbursed expenses shall be identified as a separate payment, or shall be identified as separate amounts of ordinary wages and expense allowances which are combined into a single payment. Advances and reimbursements shall be separately stated on Form HW-2 or forms prescribed by the department, unless the employer requires an accounting by the employee showing that the amount does not exceed the ordinary and necessary expenses incurred in the business of the employer. Although not subject to withholding, payments subject to this paragraph shall be reported on the income tax return of the recipient. §18-235-61-04 INCOME TAX LAW 235- 110 (Unofficial Compilation as of 12/31/2025) (O) Noncash remuneration, retail salesperson. Noncash remuneration for services performed by a retail salesperson, where the services are ordinarily performed for commissions in cash. The employer must separately state the fair market value of this remuneration on Form HW-2 or forms prescribed by the department. Although not subject to withholding, remuneration subject to this paragraph shall be reported on the income tax return of the recipient. (P) Remuneration for services performed as an employee by a duly ordained, commissioned, or licensed minister of a church in the exercise of the employee’s ministry or by a member of a religious order in the exercise of duties required by the order. Although not subject to withholding, remuneration subject to this paragraph shall be reported on the income tax return as income of the recipient. For purposes of this paragraph, the term religious order is defined in Internal Revenue Service Procedure 91-20, 1991-1 CB 524. [Eff 2/16/82; am and ren §18-235-61-03 10/13/94; am 6/24/99] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235- 67) §18-235-61-04 Services performed by employees within and without the State. (a) Resident employee. Wages earned by resident employees are subject to Hawaii income tax and are subject to withholding pursuant to section 235-61, HRS, and sections 18-235-61-01 to 18-235-61-14 regardless of where the services are performed. Therefore, even if the employee performs services out-of-state or for an employer which has an office in-state but is headquartered out-of-state, wages earned by a resident employee are subject to Hawaii income tax and withholding. If wages earned by a resident employee also are taxed by another jurisdiction, a tax credit may be available under section 235-55, HRS. (b) Nonresident employee. (1) In general. Wages paid to a qualifying nonresident employee for services performed in the State are not subject to withholding. The wages, however, may be subject to Hawaii income tax as imposed by section 235-4, HRS. An employee is a qualifying nonresident employee for purposes of section 235-61, HRS, and this section if: (A) The employee is performing services in the State for an aggregate of not more than sixty days during the calendar year; (B) The employee is a nonresident as set forth in section 235-1, HRS, or the employer reasonably believes the employee is a nonresident; (C) The employee is paid for services performed from an office located outside the State; (D) The employee’s regular place of employment (where the employee regularly performs services for the employer) is outside the State; and (E) The employer does not reasonably expect the employee to perform services in the State an aggregate of more than sixty days during the calendar year. A qualifying nonresident employee does not include an employee performing services for a contractor as defined in section 237-6(1), HRS, and the contractor is performing work for a construction project located in Hawaii. (2) Statement of nonresidency. To qualify for the exemption from withholding on wages as set forth in section 235-61, HRS, and this section, nonresident employees shall file a statement of nonresidency on forms prescribed by the department. (A) Filing requirement. All nonresident employees may file a signed statement of nonresidency with their employer. The employer then shall file the original statement of nonresidency with the director or designee in the taxation district in which the employer’s principal place of business is located or where services are principally performed. A copy of the form shall be retained in the records of the employer. (B) Effective date. The employer shall cease withholding taxes from a nonresident employee’s wages on or after the first payroll period or the first payment of wages after the statement of nonresidency is filed with the department. (C) Investigation of nonresidency status. An employer, however, shall withhold taxes from the wages of a nonresident if the employer is notified by the department of an investigation into the nonresidency status of the employee. Notice of the investigation and the department’s determination shall be sent to both the employer and the employee. The investigation into an employee’s residency status shall be completed within a reasonable time. The department shall notify both the employee and the employer of the department’s determination. HRS §235-61(e) INCOME TAX LAW §18-235-61-05 235- 111 (Unofficial Compilation as of 12/31/2025) A notice of the department’s determination shall be effective for the first payment of wages made on or after the first day of the calendar month which is at least thirty days after notice from the department is received. At the option of the employer, the department’s determination may go into effect at an earlier payroll period. (D) Change of status. If at anytime the employee’s residency status changes, the employee shall notify the employer of the change in status within ten days. The employer then shall notify the department of the change in the employee’s residency status. The change in status shall go into effect for the first payment of wages on or after the first day of the calendar month which commences at least thirty days after the department is notified. At the option of the employer, however, the change in residency status may go into effect at an earlier payroll period if the employee is notified of the change. [Eff 2/16/82; am and ren §18-235-61-04 10/13/94; am 1/29/99; am 9/20/99] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-05 Payroll period. (a) In general. Pursuant to section 235-61, HRS, and sections 18- 235-61-01 to 18-235-61-14, an employer shall withhold taxes from wages paid to an employee for services rendered, unless otherwise exempted. The amount of tax the employer shall withhold from an employee’s wages depends on the filing status of the employee, the number of exemptions the employee is eligible to claim, and the frequency of the payroll periods. The amount of tax shall be calculated by using the withholding tables or formula provided by the department. (b) Daily payroll period. If an employee has a daily payroll period, the employer shall withhold taxes from the employee’s daily wage. The employer shall use the daily or miscellaneous payroll period table provided by the department. However, if the wages are for a period of less than a week (seven days) and the employee verifies that the employee is not paid wages subject to withholding by any other employer during the same week, withholding may be calculated on a weekly payroll period basis. (c) Miscellaneous payroll period. In order to calculate the amount of tax to withhold where an employee has either a miscellaneous payroll period, or has no payroll period, the employer shall: (1) Count the number of days (including Sundays and holidays) in the period covered by the wage payment. If the wages are unrelated to a specific length of time (i.e., commissions paid upon completion of a sale), then the number of days in the wage payment shall be determined by counting the number of days from the date of the last payment to the date of the latter of: the last payment of wages made during the same calendar year; the date employment commenced (if during the same calendar year); or January 1 of the same calendar year. (2) Determine the average wage per day by dividing the amount of the wage payment by the number of days covered by the wage payment. (3) Compute the amount of tax to be withheld on the average wage per day by using the daily or miscellaneous payroll period table or formula provided by the department. (d) Payroll period of less than a week. Where an employee is paid for a period of less than one week and signs a statement (subject to penalties set forth in section 231-34, HRS) verifying that the employee does not work for wages subject to withholding for any other employer during the same calendar week, then the employer is permitted to compute withholding based on a weekly payroll period, instead of a daily or miscellaneous payroll period. If an employer is eligible, but does not elect to use the weekly payroll period basis, the employer shall compute and withhold tax as if the aggregate amount of wages paid to the employee during the calendar week is for a daily or miscellaneous payroll period. An employer that elects to calculate withholding based on a daily or miscellaneous payroll period shall withhold, from each wage payment, an amount sufficient to ensure withholding of the correct amount of tax. If an employee subsequently begins work for wages subject to withholding for another employer, the employee shall notify the employer to which the employee gave the written statement within ten days. Thereafter, the employer must use the daily or miscellaneous payroll period table in computing the amount of tax to be withheld. (e) Supplemental wages. If supplemental wages, such as bonuses, commissions, or overtime pay, are paid at the same time as regular wages, the amount of tax to be withheld shall be calculated based on the aggregate amount of supplemental and regular wages, as if it were a single wage payment for the payroll period. If supplemental and regular wages are paid at different times, the employer may calculate the amount of tax to be withheld by aggregating the supplemental wages with either: the regular wages for the current payroll period, or the regular wages for the last preceding payroll period within the same calendar year. If supplemental wages are paid to an employee during a calendar year, for a period which includes two or more consecutive payroll periods, and other wages also are paid during the calendar year, the employer shall calculate the amount of tax to be withheld on the supplemental wages as follows: (1) Determine the average wage for each payroll period by dividing the sum of the supplemental wages and the other wages paid for the payroll period by the number of payroll periods. HRS §235-61(c) §18-235-61-06 INCOME TAX LAW 235- 112 (Unofficial Compilation as of 12/31/2025) (2) To determine the amount of tax to be withheld from each payroll period, treat the average wage calculated in paragraph (1) as the amount of wages paid for the payroll period. The amount of taxes to be withheld shall be calculated by using the tables or formula provided by the department, given the length of the payroll period and the average wage paid for the payroll period. (3) Lastly, from the sum of the taxes computed on the basis of the average wage per payroll period, subtract the sum of the taxes previously withheld or to be withheld from wages, other than supplemental wages, for the payroll periods. The balance, if any, constitutes the amount of the tax to be withheld from the supplemental wages. [Eff 2/16/82; am and ren §18-235-61-05 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-06 Amount of tax to be withheld. (a) To determine the amount of tax to be withheld, the employer shall use either the tables or formula method provided by the department. If the payroll period is a multiple of one week, other than biweekly, the employer shall determine the amount of tax to be withheld as follows: (1) Determine the average weekly or biweekly wage for the particular payroll period; (2) Compute the amount of tax to be withheld, based upon the average wage paid to the employee; and (3) Multiply the amount of tax to be withheld per payroll period by the number of weeks in the payroll period. If wages are paid on a quarterly, semiannual, or annual basis, the employer shall compute the amount of tax to be withheld by multiplying the average wage for one month by the number of months in the payroll period. (b) For the purpose of calculating income tax withholding amounts for the 2025 taxable calendar year, the employer shall use the tables in the appendix entitled “Appendix 1: Income Tax Withholding Tables for tax year 2025” (August 16, 2024) located at the end of chapter 18-235, which is made a part of this section. (c) For the purpose of calculating income tax withholding amounts for each of the 2026, 2027, 2028, 2029, 2030, and 2031 taxable calendar years, the employer shall use the tables in the appendix entitled “Appendix 2: Income Tax Withholding Tables for Taxable Years Beginning After December 31, 2025” (June 30, 2025) located at the end of chapter 18-235, which is made a part of this section. [Eff 2/16/82; am and ren §18-235-61-06 10/13/94; am 12/6/2024; am 12/5/2025] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-07 Additional withholding by agreement permissible. The employer and employee may agree in writing to withhold an amount greater than, but not less than, the amount required under section 235-61, HRS and this section, and as calculated in the tables or formula method provided by the department. Any additional amount withheld shall be considered tax required to be deducted and withheld under section 235-61, HRS, and this section. [Eff 2/16/82; am and ren §18-235-61-07 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-08 Returns and statements; Forms HW-14, HW-2, and HW-3. (a) Each employer shall complete and furnish the following applicable returns as prescribed by sections 235-61 to 235-63, HRS, and the department, numbered and designated as follows: HW-14 Withholding Tax Return; HW-2 Statement of Hawaii Income Tax Withheld and Wages Paid; and HW-3  Employer’s Return and Reconciliation of Hawaii Income Tax Withheld From Wages. (b) Form HW-14. (1) In general. Pursuant to sections 235-62 and 235-63, HRS, every employer required to file a return of income tax withheld from wages shall file Form HW-14 or forms prescribed by the department, accompanied by payment of the tax withheld. Unless otherwise provided, the return shall identify the period covered by the return, the total wages paid by the employer in the period (including all wages, even though some wages may be excludable from withholding, such as wages paid to persons who are blind, deaf, or totally disabled), the total amount of taxes withheld in the period, and any other information which the director may require. Employers that withhold income tax of $1,000 or more a year shall file Form HW-14 on a monthly basis; employers that withhold income tax of less than $1,000 a year may file Form HW-14 on a quarterly basis. HRS §235-61(c) HRS §235-61(g) HRS §235-61 INCOME TAX LAW §18-235-61-08 235- 113 (Unofficial Compilation as of 12/31/2025) (2) Cease paying wages. Even if no wages are paid or an employer temporarily ceases to pay wages for any period (as in the case of seasonal business activity), the employer shall continue to file Form HW-14; the form shall indicate that no wages have been paid and that no taxes have been withheld. If an employer ceases business permanently, the employer shall file a final Form HW-14 marked “Final Return” and Form HW-1A (Notification of Cancellation of Withholding). (3) Where to file. Form HW-14 shall be filed in the taxation district where the employer’s principal place of business is located or where services are principally performed. Nonresident employers shall file Form HW-14 with the Oahu District office. Form HW-14 shall be signed by the employer and shall be accompanied by payment of any taxes withheld from wages during the period. (4) Filing due date. In general, monthly and quarterly filings of Form HW-14 are due on or before the fifteenth day of the calendar month which follows the period for which taxes are withheld. Where, however, an employer has a liability for taxes withheld in excess of $100,000 a year, the employer shall report and submit taxes on or before the tenth day of the calendar month which follows the period for which taxes are withheld. For example, an employer that files Form HW-14 on a monthly basis shall report and submit taxes withheld during the month of January on or before February 15 of the same year. (5) Change in filing. If the amount of taxes withheld by an employer increases to $1,000 or more or decreases below $1,000 a year, the employer shall notify the department on forms prescribed by the department. Accordingly, the employer shall change the frequency for filing Form HW-14 (from quarterly to monthly, or from monthly to quarterly). Where the employer’s liability for taxes withheld increases above or decreases to $100,000 or less, the employer shall notify the department on forms prescribed by the department. Accordingly, the employer shall file Form HW-14 by the appropriate date as set forth in this section. (6) Electronic filing. Employers may substitute electronic filing, such as the use of magnetic tapes, computer printouts, or other approved media, for filing Form HW-14. Before any information is transmitted electronically, the employer shall file Form HW-25 or forms prescribed by the department and seek permission to file electronically. The consent of the director or designee must be received before electronic filing is permitted. (7) Failure to file; failure to pay; underpayment of tax. An employer that fails to pay or underpays the tax liability, or that fails to file information as required under section 235-61, HRS, and sections 18-235-61-01 to 18-235-61-14 shall be subject to penalties and interest as set forth in section 231-39(b), HRS. (c) Form HW-2. Provided all the required information is submitted, commercially printed forms or federal Form W-2 may be substituted for Form HW-2. (1) In general. Every employer shall furnish Form HW-2 to: (A) Every employee upon whose wages deduction and withholding is required; (B) Every employee who is blind, deaf, or totally disabled even though the wages are not subject to withholding; and (C) Every employee to whom wages subject to withholding (or payments under a wage continuation plan) have been paid in any period during the calendar year (or period of employment). (2) Information provided. Each Form HW-2 must show the following information relating to wages earned by and taxes withheld from an employee during the calendar year for which the HW-2 is issued: the employee’s name, address, and social security number, if any; the employer’s name, address, and Hawaii withholding identification number; and time period covered by the statement; the total amount of wages paid to the employee during the time period, including wages which are not subject to withholding, such as wages paid to a person who is blind, deaf, or totally disabled; the amount of income tax deducted and withheld, if any; and such other information as the director may require. Noncash remuneration, and advances or reimbursements for expenses and the like, must be separately stated on Form HW-2 or forms prescribed by the department. The form must be furnished to both the employee and the director or designee. Federal Form 1099 also may be used for this purpose. If the total amount of noncash remuneration, advances, and reimbursements, together with the wages subject to withholding and payments under wage continuation plans, total more than the amount of one withholding exemption for any period, then a separate Form HW-2 or forms prescribed by the department must be furnished for each type of payment. HRS §235-61 §18-235-61-08 INCOME TAX LAW 235- 114 (Unofficial Compilation as of 12/31/2025) (3) If a separate form is used, it must include any wages subject to withholding (or payments under a wage continuation plan) not reported on Form HW-2 or forms prescribed by the department and filed with the director or designee. (4) Filing date; forms. Every employer shall provide each employee that it employed during the preceding calendar year with copies B and C of Form HW-2 by January 31 of the following calendar year. If, however, an employee ceases to work for an employer before the calendar year ends and is not expected to return for the remainder of the calendar year, the employee may submit a written request to the employer requesting copies B and C of Form HW-2 before January 31 of the following calendar year. Upon receiving the written request, the employer shall provide the HW-2 statements within thirty days or by January 31 of the following calendar year, whichever is earlier. (d) Form HW-3. Form HW-3 (Employer’s Return and Reconciliation of Hawaii Income Tax Withheld from Wages) shall show the following information: (1) The employer’s name, address, and Hawaii withholding identification number; (2) The total wages paid to employees (including cost of living allowance, sick pay, and wages paid to a person who is blind, deaf, or totally disabled); (3) The total wages subject to withholding that are paid to employees; (4) The amounts of tax withheld from employees’ wages, as shown on these forms; (5) The amount of tax remitted to the department, as reported monthly or quarterly on Form HW-14; (6) Total payments made during the calendar year; and (7) Other information as the director may require. The employer shall remit any discrepancy between the total amount of tax withheld from all employees’ wages during the preceding calendar year and the amounts remitted to the department as reported monthly or quarterly on Form HW-14. (e) Reconciliation of taxes withheld; Forms HW-2 and HW-3. Each employer shall file with the department, on or before the last day of February following the close of the calendar year, Copy A of Form HW-2 issued for the preceding calendar year, and copies 1 and 2 of Form HW-3. If an employer submits more than one Form HW-2, the employer shall attach a list of the amounts of income tax withheld, as stated in the HW-2 forms. (1) Separate divisions. If an employer’s total payroll covers a number of separate divisions, the employer may separate and submit the HW-2 forms by divisions. A summary list must be submitted, along with each division’s HW-2 forms, and the figures shall be reported on the employer’s HW-3 form. The total of all tax withheld by the divisions shall correspond with the entry made on Form HW-3. (2) Large number of forms. Where an employer submits a large number of HW-2 forms, the forms may be forwarded to the department in packages of convenient size. The packages shall be identified with the employer’s name, Hawaii withholding identification number, and shall be consecutively numbered; Form HW-3 shall be placed in the first package. (3) Employer goes out of business. If an employer goes out of business or permanently ceases to pay wages, the employer shall file Form HW-3 with accompanying HW-2 statements at the same time the final Form HW-14 return is filed. The final Form HW-14 shall be marked “Final Return”. The employer also shall file Form HW-1A. (4) Extension of time to file. Upon application by an employer, the director may grant an extension of time of not more than two months for filing Form HW-3 and the accompanying statements and list. Except in a case of termination of business or the like, an application for an extension of time must be filed on or before the last day of February. (5) Amendment of Forms HW-2 and HW-3. An employer may amend incorrectly filed Forms HW-2 and HW-3. Amendments shall be made on forms prescribed by the department. Amendment of Forms HW-2 and HW-3 shall be made within three years from the date the form is due or three years after the form is filed, whichever is later. If Form HW-2 is amended and the amendment occurs prior to the filing of Form HW-3 for the taxable year, the employer shall submit the amended Form HW-2 at the time Form HW-3 is filed. If, however, the amendment of Form HW-2 occurs after Form HW-3 for the taxable year has been filed, the employer shall submit the amended HW-2 with Form HW-23 (“Amended Employer’s Return and Reconciliation of Hawaii Income Tax Withheld from Wages”) or on forms prescribed by the department. (f) Use of single return form for more than one employer. Except as provided in sections 18-235-61- 01 to 18-235-61-14 and subject to the approval of the director or designee, a single return may comprise the monthly HRS §235-61 INCOME TAX LAW §18-235-61-09 235- 115 (Unofficial Compilation as of 12/31/2025) withholding tax return of more than one employer where the employers have been permitted to file the required tax information electronically. (1) Authorization. (A) The return may be made by an agent for or on behalf of the employer required to make the return. Each agent filing a single return for more than one employer shall include, with each return, a list of the participating employers. (B) The agent filing the single return first shall seek approval of the director or designee, on forms prescribed by the department, to file the return as agent for more than one employer. (C) The agent shall obtain a power of attorney, acceptable to the director or designee, from each employer which it represents and the power of attorney shall be filed with the director or designee. The power of attorney shall authorize the agent to sign the return, verify by written declaration that the return is made under penalties of perjury and in accordance with law, file the required return, and direct payment of the employer’s payroll taxes. (D) The agent shall keep and maintain a copy of each power of attorney until the power has been revoked by the respective employer. (E) The agent shall notify the director or designee if a power of attorney is revoked and the effective date of the revocation, at least five days prior to the due date of the return. Notification of the revocation shall be made and filed as prescribed by the department. (2) Form of return. (A) Employers or their agents may file the monthly or quarterly withholding tax return information on computer printouts, magnetic tapes, or other media approved by the director or designee. To seek approval, employers or their agents shall file the appropriate form prescribed by the department. (B) Whenever magnetic tapes are used as attachments, the tape shall be in the magnetic tape format utilized by the department. (C) The withholding tax information submitted on computer printouts, magnetic tapes, etc., shall include all information which is required on Form HW-14. In addition, a list of the employer identification numbers in numerical sequence, the name of each employer, and any other information the director or designee may require shall be attached to the computer printouts, magnetic tapes, etc. (D) All computer printouts, magnetic tapes, and other approved media shall conform to the requirements of the department and as set forth in this section. (E) The director, from time to time, may change the requirements or the required forms as needed. (3) Filing. The return shall be deemed properly filed upon submission of the information required by the department. (4) Payment. (A) The tax withheld shall be due and payable at the time the withholding tax return information is filed with the department. One copy of the withholding tax return information shall be filed with the department; a second copy shall be stamped upon receipt of payment and returned to the employer or agent. (B) Each agent filing the return permitted by this section shall pay the taxes in full by cash, cashier’s check, or certified check. [Eff 2/16/82; am and ren §18-235-61-08 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-09 Withholding exemptions. (a) In general. In order for an employer to determine the correct amount of taxes to withhold from an employee’s wages, each employee shall complete Form HW-4 (Withholding Exemption and Status Certificate) or forms prescribed by the department for each employer who is required to withhold taxes from the employee’s wages. Form HW-4 shall show the employee’s marital status, the number of exemptions the employee qualifies for, the employee’s address, social security number, and signature. If an employee does not furnish Form HW-4 to the employer, the employer shall withhold tax as if the employee is single and claims no withholding exemption. At the election of the employer, commercially printed forms substantially the same as Form HW-4 may be used. However, federal Form W-4 may not be used. (b) Exemptions claimed by employee. The number of withholding exemptions claimed by an employee shall not exceed the number of exemptions for which the employee qualifies. If the employee is married, the employee may claim any exemptions to which the employee’s spouse is entitled, but only if the employee’s spouse has not already claimed the exemptions. HRS §235-61(f) §18-235-61-10 INCOME TAX LAW 235- 116 (Unofficial Compilation as of 12/31/2025) (c) No Form HW-4 in effect. The first HW-4 form furnished by the employee shall be effective for the first payroll period ending on or after the date on which the form is furnished to the employer. If wages are paid without regard to a payroll period, Form HW-4 shall be effective for the first payment of wages on or after the date on which it is furnished to the employer. (d) Amending Form HW-4; effective date. If an employee chooses to amend an existing Form HW-4, it shall be effective no later than the first payment of wages made on or after the thirtieth day after the amendment is made. If wages are paid without regard to a payroll period, then Form HW-4 shall be effective for the first payment of wages. At the election of the employer, however, Form HW-4 may be made effective prior to this date. (e) Change in exemption status, number of exemptions. In general, if the number of exemptions the employee may claim increases, Form HW-4 may be amended to reflect the change. If, however, the number of exemptions the employee may claim decreases, or there is a change in the taxpayer’s marital status, the employee shall amend Form HW-4 to reflect the change within ten days after the change occurs. Where changes do not affect the amount of tax to be withheld until the next calendar year (i.e., death of a spouse or dependent), the employee shall amend Form HW-4 filed with the employer on or before December 1 of the year in which the change occurs. If the change occurs in December, the employee shall amend Form HW-4 within ten days after the change occurs. If an employee no longer qualifies for a complete exemption from income tax withholding, an amended Form HW-4 shall be filed to reflect the change and allow for withholding of taxes. [Eff 2/16/82; am and ren §18- 235-61-09 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-10 Employer’s identification number. An employer shall apply for an employer identification number with the department on forms prescribed by the department. Each employer shall be assigned only one identification number. The director, however, may require separate identification numbers for separate divisions of an employer’s business, or for services performed not in the course of the employer’s trade or business. The identification number assigned to an employer shall be used on all applications, returns, payments, statements, forms, and correspondence with the department. [Eff 2/16/82; am and ren §18-235-61-10 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-11 Taxation district in which to file. All applications, returns, payments, statements, forms, and correspondence the employer is required to file with or submit to the department, including any information required of the employee relating to employment and the payment of taxes, shall be filed with the director or designee in the taxation district in which the employer’s principal place of business is located. Where an employer is a nonresident and has no place of business in the State, all filings and submissions shall be made to the director or designee in the first taxation district of Oahu. [Eff 2/16/82; am and ren §18-235-61-11 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-12 Statutory period. Where monthly or quarterly returns must be filed under section 235-62, HRS, and a final return for the taxable year showing the reconciliation of wages is required, the statutory period of limitation shall commence upon the filing of the final return for the taxable year or the due date of the final return, whichever is later. [Eff 2/16/82; am and ren §18-235-61-12 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235- 118) (Imp: HRS §§235-61 to 235-67) §18-235-61-13 Records. (a) In general. Every employer that becomes subject to section 235-61, HRS, is required to keep full, complete, regular, and accurate records pertaining to the withholding of taxes. Every employer also shall keep records of each adjustment or settlement of income tax withheld under section 235-61, HRS, and made pursuant to sections 18-235-61-01 to 18-235-61-14. The records shall be available for inspection by the director. Every employer also shall maintain a record of the current addresses of all employees at all times; each employee must furnish a current address to the employer. (b) Records in connection with collection of income tax at source on wages. Every employer required to deduct and withhold income tax upon the wages of employees pursuant to section 235-61, HRS, and this section shall keep records of all remuneration paid to such employees. For purposes of this section, “remuneration” includes all payments, whether in cash or in a medium other than cash. The record keeping requirements of this section, however, are not required for noncash payments for services performed not in the course of the employer’s trade or business, and tips received by an employee in a medium other than cash or of an amount less than $20 for a calendar month. The employer’s records shall contain the following information about each employee: (1) The name, address, and social security number of the employee; (2) The total amount and date of each payment of remuneration (including any sum withheld as tax or for any other reason) and the period of time covered by the payment; (3) The amount of the remuneration payment which constitutes wages subject to withholding; HRS §235-61 HRS §235-61 HRS §235-61 HRS §235-61 INCOME TAX LAW §18-235-67 235- 117 (Unofficial Compilation as of 12/31/2025) (4) The amount of tax collected with respect to the remuneration payment and the date the tax was collected, if the tax was collected at a time other than when the payment was made; (5) If the total remuneration payment differs from the amount from which tax has been withheld, the reason for the difference in amounts shall be provided by the employer; (6) The fair market value and date of each payment of noncash remuneration made to an employee, for services performed as a retail commission salesperson from which no income tax was withheld; (7) The withholding exemption certificate (Form HW-4) filed with the employer by the employee; (8) Any agreement between the employer and the employee for the withholding of additional amounts of tax; (9) With respect to employee performed services which are not performed in the course of the employer’s trade or business, the employer shall maintain sufficient records detailing, by quarter, the dates the services were performed and the amount of cash remuneration paid for the services performed; and (10) Where an employee receives tips in the course of the employee’s employment, the employer shall maintain records of tips received by the employee, including copies of any statements furnished by the employee. [Eff 2/16/82; am and ren §18-235-61-13 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-61-14 Change of ownership; transfer of business; employer going out of business. An employer must notify the director or designee if there is a change in the business, including: a sale or other transfer of the business; the employer is going out of business; the employer or business has a change of address; or the name of the business changes. [Eff 2/16/82; am and ren §18-235-61-14 10/13/94] (Auth: HRS §§231-3(9), 235-61, 235-118) (Imp: HRS §§235-61 to 235-67) §18-235-62 to 18-235-65 (Reserved)