Codifies the existing annual reconcilitation return filing requirement.

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to clarify existing department policies and to make the administrative process of withholding and remitting income taxes more business friendly. This Act requires employers to file a quarterly informational return for state income tax withholding and clarifies the time schedule for remitting the withheld taxes.

SECTION 2. Section 235-62, Hawaii Revised Statutes, is amended to read as follows:

"§235-62 Return and payment of withheld taxes; penalties. (a) Every employer required by this chapter to withhold taxes on wages paid in any month shall make a return of such wages to the department of taxation on or before the fifteenth day of the calendar month following the [month for which the taxes have been withheld, except as provided in subsection(c)]close of each of the first three quarters, to wit, on or before April 15, July 15, and October 15.

(b) In addition to the three quarterly returns required by this section, every employer shall also make a combined fourth quarter and annual return to be made on or before the last business day of the second month following the close of the calendar year. This annual return shall be an informational reconciliation return including the amount of taxes withheld at the close of the final quarter of the previous year in addition to the total amount of taxes withheld during all calendar quarters of the previous year, as required by the department.

[(b)](c) The returns required under this section shall be in such form, including computer printouts or other electronic formats, and contain such information as may be prescribed by the director of taxation. The returns shall be filed with the director at the first taxation district in Honolulu. For employers remitting taxes withheld on a semi-weekly schedule or monthly schedule as provided for in subsection (d), the quarterly return shall be accompanied by a reconciliation schedule and contain such other information as may be prescribed by the director of taxation.

[(c)](d) [Every return required under this section shall be accompanied by a remission of the complete amount of tax withheld, as reported in the return; provided that each employer whose liability for taxes withheld exceeds $40,000 annually shall remit the complete amount of tax withheld on a semi-weekly schedule.]Each employer shall remit all payment of tax withheld, together with any voucher prescribed by the director, to the department based upon the following schedule:

[(d)](e) If the director believes collection of the tax may be in jeopardy, the director may require any person required to make a return under this section to make such return and pay such tax at any time.

[(e)](f) [The director may grant permission to employers, whose liability to pay over the taxes withheld as provided in this section shall not exceed $5,000 a year, to make returns and payments of the taxes due on a quarterly basis during the calendar year, the returns and payments to be made on or before the fifteenth day of the calendar month after the close of each quarter, to wit, on or before April 15, July 15, October 15, and January 15. The director may grant permission to employers to make monthly payments based on an estimated quarterly liability; provided that the employer files a reconciliation return on or before the fifteenth day of the calendar month after the close of each quarter during the calendar year as provided by this section.]The director, for good cause, may extend the time for making returns and payments, but not beyond the fifteenth day of the second month following the regular due date of the return. With respect to wages paid out of public moneys, the director, in the director's discretion, may prescribe special forms for, and different procedures and times for the filing of, the returns by employers paying the wages, or may waive the filing of any returns upon the conditions and subject to rules the director may prescribe.

[(f)](g) For purposes of this section[,]:

["semi-weekly]"Semi-weekly schedule" means:

In addition to the allowances provided under section 231-21, each employer shall have at least three banking days following the close of the semi-weekly period by which to remit the taxes withheld as provided for in section 6302 of the Internal Revenue Code.

"Monthly schedule" means on or before the fifteenth day of the calendar month following the month for which the taxes have been withheld.

"Quarterly schedule" means on or before the fifteenth day of the calendar month following the close of each quarter, to wit, on or before April 15, July 15, October 15, and January 15.

(h) All returns and schedules required by this section shall be signed by the employer, if made by an individual, or by the president, vice-president, secretary, or treasurer of a corporation, if made on behalf of a corporation. If made on behalf of a partnership, firm, society, unincorporated association, group, hui, joint venture, joint stock company, corporation, trust estate, decedent's estate, trust or other entity, any individual delegated by the entity shall sign the same on behalf of the employer. If for any reason it is not practicable for the individual employer to sign the return, it may be done by any duly authorized agent.

(i) An employer that fails to pay or underpays the tax liability when due or that fails to file a return or schedule required by this section shall be subject to penalties and interest as set forth in section 231-39."

SECTION 4. This Act shall take effect on January 1, 2007.