Hawaii: Vacation Friendly; NOT Voluntary Disclosure Friendly?
Hawaii is known as a great vacation spot. However, if you find out you have had state tax nexus in Hawaii for several years, but have not filed returns, what are your options?
Like most states, Hawaii has a Voluntary Disclosure Agreement (VDA) Program. However, unlike most states, the program is "informal" and is done with phone correspondence and a letter. So what's the problem?
The problem is, Hawaii does not limit the look-back period. What? For example, if you become aware that you have had nexus in Hawaii since 1992, but haven't filed returns, you would have to file returns all the way back to 1992, even under a VDA program. So what's the benefit of coming forward under Hawaii's VDA program?
Well, you can obtain a waiver of all penalties, and it won't be considered fraud or willful evasion of tax. In addition, you can be in compliance on a prospective basis without the concern that Hawaii will learn of your previous nexus infractions, and issue a large assessment which includes tax, interest and penalties.
If you are concerned if you have nexus or a tax filing obligation in Hawaii, please contact me at email@example.com to proactively resolve your growing liability.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.