Statute of limitations on back state income taxes in Hawaii

[Patricked984]

I was curious what the statute of limitations are to collect back state income taxes in Hawaii are I've seen 6 years on Hawaii own Dept of taxation website, 10years on nolo's website and 15 years on some other websites, and do I need to file a return to start the clock because I was living in Hawaii in 2009-2010, and my employer didn't take out taxes( I was considered self employed) but that was almost 10 years ago so I was a dumb kid, and my employer didn't tell me I needed to ( I'm 33 now) anyways I've since had multiple strokes and am on SSDI, and I'm living on the mainland now. I've read online about the statute of limitations, but I'm not sure what starts that, I've read that you had to have filed a tax return to start that? But I'm not sure I ever filed one? So can they come after me indefinitely? Thank you

 

[Zigner]

I'm not 100% sure of the statute of limitations in Hawaii, but this sort of SoL usually begins to run at the time you file the tax return. In other words, the question is moot right now.

 

[HRZ]

and the time clock may be suspended for being out of state ..I'd not kick a sleeping dog.

 

[PayrollHRGuy]

It isn't only state tax that should be of concern. There would have been federal tax as well.

My bet is that the employer paid cash and no government entity ever heard about the wages. As HRZ said. Don't kick the sleeping dog.

 

[Taxing Matters]

With most taxing statutes there is a two step process. The first is determining the amount of tax that you owe. This step is known as assessment. Then after the tax is assessed comes the step of collecting that tax. Each of these two steps has its own limitations period. For Hawaii, both of those limitations periods are set out in Hawaii Revised Statutes section 235-111.

Under that statute, the limitation on assessment is three years from the later of the date the tax return is filed (either by the taxpayer or the state) or the date that the return was due. This is similar to the rule used by the federal government. What this means is that until you file a return is filed there is no limitation on when the state can chase you for a return or file a return for you. So if you haven't filed a return and the state has not yet done one for you the state can come after you at any time, even 50 or 100 years from now. Once you file the return, the state then would have 3 years to audit that return and propose any additional tax owed.

Once the tax is assessed, the state has 15 years from the date the tax is assessed to collect it.

Note that both the period for assessment and the period for collection are tolled (suspended) for various events, notably here those limitation periods are suspended when the taxpayer is out of the state for a continous period of at least six months or more.

You are legally obligated to file the returns and pay the taxes you owe no matter how long it has been. However, typically if the state or federal government has not pursued this matter after about 7-8 years it is not likely to ever do so and if you don’t do anything nothing may ever come of it. But if the state does ever come after you for it, the longer you wait the more penalties and interest you end up owing. So you have to decide how to best approach it. If the Hawaii Department of Taxation has not had your current mailing addresses since you left, it is possible that it has tried to contact you and/or filed a return for you already.

You might want to contact the Department, either by yourself or through a Hawaii tax professional (e.g. enrolled agent, CPA, or tax attorney) to find out if there are assessments against you for any years that are unpaid. If you do it yourself, I suggest not mentioning specific tax years; simply ask if there are any income taxes for you that show as unpaid and if so what years those are. Then you will know how things stand: if the Department says there is nothing owed then you never filed a return and the state did not do one for you. If the Department says you owe something for those years, then you know the state did file the returns for you. With that information you can decide what you want to do from there.

 

[Patricked984]

Thanks for the replies! I have gotten a letter titled Final Assessment of Income Tax this was last year May 11th, and the details of taxes due are for 2009-2010, and it's only for $5200 including fees ($2300 not including), so would this count as the taxes assesed, were in 2010 so potentially they could still come after me till 2025, but more than likely they will stop this year(8 years?)? I have never filed a return though, did Hawaii state file it for me? Because I have the notice of final assessment? And what do you mean by not kicking a sleeping dog hrz? Like calling them up or something because I wasn't planning on doing that, I just want it to go away I live on the mainland now(which I had a question about Taxing Matters, you said if I've lived somewhere else for 6 months it's suspended, I've lived on the mainland since halfway through 2010) and I've had a couple strokes so I'm living off SSDI now.

 

[Taxing Matters]

I have gotten a letter titled Final Assessment of Income Tax this was last year May 11th, and the details of taxes due are for 2009-2010, and it's only for $5200 including fees ($2300 not including), so would this count as the taxes assesed...did Hawaii state file it for me?

You said that you did not file for 2009 & 2010. Given that fact, the letter you received indicating final assessment of income tax does mean that Hawaii’s Department of Taxation (DoT) essentially prepared those returns for you and assessed that tax it computed from that. It is possible that had you filed the returns yourself the tax owed would be less. That would occur if you had deductions or credits to claim that the state did not know about. You might be able to get that fixed to the right tax amount even now, though I can't guarantee that since I don’t practice in Hawaii and don’t know what the DoT's position is on adjusting tax after a final assessment of tax is done.

Whatever the correct amount of tax owed is, however, the state will have 15 years from the date the tax was assessed to collect it. If it was just assessed this year, that means the state would have at least 15 years from this year to collect it. The problem is that the 15 years won't start to run again until you move back to Hawaii. If you never move back then the state technically can keep trying to collect from you forever. The good news for you is that the state cannot attach your Social Security disability benefits to collect what is owed. If you have no other income and have no assets in Hawaii, there is little the state can do to collect the tax from you. The state can, however, attach any federal income tax refund you may be due.

 

[Patricked984]

You said that you did not file for 2009 & 2010. Given that fact, the letter you received indicating final assessment of income tax does mean that Hawaii’s Department of Taxation (DoT) essentially prepared those returns for you and assessed that tax it computed from that. It is possible that had you filed the returns yourself the tax owed would be less. That would occur if you had deductions or credits to claim that the state did not know about. You might be able to get that fixed to the right tax amount even now, though I can't guarantee that since I don’t practice in Hawaii and don’t know what the DoT's position is on adjusting tax after a final assessment of tax is done.

Whatever the correct amount of tax owed is, however, the state will have 15 years from the date the tax was assessed. If it was just assessed this year, that means the state would have at least 15 years from this year to collect it. The problem is that the 15 years won't start to run again until you move back to Hawaii. If you never move back then the state technically can keep trying to collect from you forever. The good news for you is that the state cannot attach your Social Security disability benefits to collect what is owed. If you have no other income and have no assets in Hawaii, there is little the state can do to collect the tax from you. The state can, however, attach any federal income tax refund you may be due.

Thanks for the in-depth answers you have given me, I've been trying to get those questions answered for about a year when they first mailed me a statement of taxes due. My only income is SSDI and some veterans disability income but I have heard they can't touch that, is that correct? And I don't have any assets there anymore. Thank you again for your replies

 

[LdiJ]

Thanks for the in-depth answers you have given me, I've been trying to get those questions answered for about a year when they first mailed me a statement of taxes due. My only income is SSDI and some veterans disability income but I have heard they can't touch that, is that correct? And I don't have any assets there anymore. Thank you again for your replies

Federal tax debt, student loan debt and child support debt can be garnished from SSDI. State tax debt, and consumer debt cannot be garnished from SSDI. I do not believe that anything can be garnished from VA disability. So, as long as SSDI and VA disability are your only income you are uncollectable for the Hawaii tax debt.