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Hawaii -- at Hawaii will finally offer electronic filing of individual state tax returns next year, meaning more residents should get their refunds back a little quicker.
last -- to offer
electronic tax filing
The move will expedite refunds
but not all taxpayers will be
able to utilize the serviceBy Tim Ruel
Star-BulletinThe state Department of Taxation is starting a limited e-filing program for this year's income tax forms, due April 20. Of all the states that collect income taxes, Hawaii and Vermont were the only two that didn't offer e-filing for 1999, according to the Internal Revenue Service. (Vermont will also start e-filing for 2000 returns.)
"We want to get off that list," said Linda Cacpal, acting chief of state taxpayer services. Previously, Hawaii only offered e-filing for employer payroll withholding taxes.
The state is limiting the program while it makes sure the new system is fail-safe, however.
"It's not just anybody who can do e-file, or any preparer," said Susan Adaniya, the state's e-filing coordinator.
A taxpayer can only e-file a state form jointly with a federal tax return.
Also, filers can only attach W-2 wage statements and Schedule X tax credit forms to their electronic returns. Those who need to attach other forms must stick with paper returns, along with those who want to submit the so-called "long form" and taxpayers who are not residents. That could change as early as the following tax season, Adaniya said.
To do e-filing, an individual taxpayer first must decide whether to go it alone or pay a professional preparer to help.
In either case, the filer or the professional must purchase tax filing software approved by the IRS. The price of the software for an individual filer could range $10 to $15 per return, while a professional may pay more than $100, Adaniya said.
Software developers will be selected later this year. Adaniya was not sure how the software would be distributed, whether at a computer store or on the Web.
Finally, tax data must be sent by midnight, April 20, unless the taxpayer files for an extension.
E-filing carries several benefits for Hawaii residents, Adaniya said. "The good thing is, because we've got these software developers involved, you should really have a lot less errors on these returns, and that's a plus," she said.
The IRS estimates 15 percent returns filed on paper contain errors, while the number for electronic returns is less than 1 percent.
"That means the people who file by paper have a higher chance of hearing from the IRS," joked IRS spokeswoman Shawn George. Fewer errors also mean fewer delayed returns.
Moreover, those who owe the government money and file early still don't have to pay until the April 20 deadline, thanks to a new voucher system. "You can file now and pay later," Adaniya said.
State officials predict anywhere from 20 percent to 30 percent of Hawaii's roughly 600,000 state tax returns will be e-filed. Last year, about 22 percent of federal returns in Hawaii were e-filed for 1999, compared with 23.4 percent nationwide, George said.
"I'm sure that the state electronic filing would appeal to many people," she said.
The IRS began experimenting with e-filing on a small scale in 1986. Hawaii had been looking into state tax e-filing for years, but did not want to proceed until it had combined all tax information for people and their businesses into one system, Cacpal said. That became possible last year, when the department signed a $50 million contract with Fairfax, Va.-based American Management Systems Inc. to computerize the state's tax collections.
The state hopes to extend e-filing to all forms of individual returns eventually, Cacpal said.
State electronic tax filings must meet the following criteria, though the list is subject to change: Filing online
A federal return must be filed at the same time.
Source: State Department of Taxation