How to Make Monthly Payments on Hawaii Back Taxes

Have you gotten behind on your Hawaii tax obligations? If you can't pay your individual or business taxes in full or your excise taxes, you may need to apply for a Hawaii tax payment plan. In the Aloha state, qualifying taxpayers can take up to 36 months to pay off back taxes in monthly installments. Keep reading to learn more.

Requirements for Payment Plans on Hawaii Tax Debts

You can only get a monthly payment plan if the following are true:

• You have filed all outstanding tax returns. 
• You continue to file and pay all taxes due while the payment plan is active.
• You pay estimated taxes in full and on time, if applicable.
• You have a bank account.

If you meet the above criteria, you can apply for a payment plan, but note that the application process gets a bit more involved if you owe over $10,000. If you don't meet the above criteria, reach out to a local HI tax pro to learn about other possible options. 

How to Apply

If you owe less than $10,000, you can apply online. Otherwise, fill out Form D-100 and fax it to the department at (808) 587-1720 or mail it to one of the addresses on the bottom of the form. If you owe more than $25,000 or if you can't pay off the bill within a year, you should also file Form CM-2 (Statement of Financial Condition and Other Information). 

If you don't hear back from DOTAX before the day of your first proposed payment, mail in a payment. In the memo line, write "installment plan" plus your case number and the last four digits of your Social Security Number or EIN. 

How to Complete Form D-100

To get a payment plan on your Hawaii back taxes, you need to complete Form D-100 (Request for an Installment Plan Agreement). This form requires basic information about your contact details and tax debt. It also asks about your bank, place of employment, gross income, household size, and real estate. 

You should note the proposed amount of your monthly payments and the date you want to pay. Then, you can choose if you want to make payments manually from your bank account or schedule them to come out automatically. Finally, review the terms of the agreement on the back page and sign the form. 

How to Complete Form CM-2

You need to complete this form if you owe over $25,000 and/or can't pay the debt in full within 12 months. The CM-2 form requires basic contact details and info about the tax debt. Then, it collects very detailed information about your finances, including the following:

• Occupation, business phone number, and length of time with employer.
• List of bank accounts with account numbers and balances.
• Credit cards with credit limits, amount owed, and available credit.
• Location, number, and contents of safe deposit boxes.
• Real and leased property addresses and tax map keys.
• Life insurance policy numbers, types, loan value, and face value.
• Details about stocks, bonds, and other securities.
• Info about monthly income and expenses.

Once you list everything in the top section, you port the numbers to the third page of Form CM-2, and you add up your total assets and liabilities (debts). On the last page, you list all of your monthly income and necessary living expenses. Then, you calculate the difference. Unfortunately, HI DOTAX doesn't let you count unnecessary or extravagant expenses in this section. 

How to Apply if You Owe More Than $10,000

If you owe more than $10,000, you need to talk to the department directly to request a payment plan. You can email [email protected]. Put "I have a delinquency question" in the subject line. Then, explain in the email that you want to set up payments. 

Otherwise, you can call the DOTAX directly at one of these phone numbers:

• Oahu – (808) 587-1600
• Hawaii – (808) 974-6374
• Kauai – (808) 274-3403
• Maui, Molokai, Lanai – (808) 984-8511

What to Expect During the Payment Plan

While you make payments, interest, and penalties will continue to accrue on your balance. If you earn a state tax refund, it will be applied to your bill. This will not cover your monthly payment, so make sure to continue making payments as usual if you get a tax refund. 

Generally, the state won't issue a tax lien against you as long as you can pay off the balance within three years. However, there are exceptions to this rule. For example, if you have a history of incompliance, the DOTAX may file the lien until you complete your payment agreement.

If DOTAX believes that you can make larger monthly payments, the state can revise your payment agreement. For example, this may happen if you file a tax return that shows significantly high income while you're on a tax payment plan.

Interest on Tax Payment Plans in Hawaii

As of 2023, Hawaii DOTAX charges interest on back taxes at a rate of ⅔ of 1% per month. That rate applies whether you're ignoring your taxes or making payments on a payment plan. Based on this monthly rate, the state's effective annual interest rate is 8%.

Defaulting on Payment Agreements

You can default on your payment agreement by missing payments or not meeting the requirements of the agreement. If you go into default, the state will demand payment in full. If you don't pay, DOTAX can issue tax liens, levy your assets, garnish your wages, or take other involuntary collection actions against you. 

Alternatives to Payment Plans

If you can't get a payment plan for any reason, you may want to think about these alternatives.

• Loan from a bank, friend, or relative — If you can borrow the money at a lower interest rate than charged by the state, you will save money by paying your tax debt with a loan.
• Offer in compromise — If you cannot afford to pay, the state may be willing to reduce your tax debt through an offer in compromise. 
• Bankruptcy — Filing bankruptcy doesn't clear all tax debts, but you may be able to discharge some tax debts. Contact a bankruptcy attorney for help.

When you talk with a tax pro, they will also be able to help you find other alternatives. 

Get Help With Hawaii Back Taxes

Do you owe back taxes in Hawaii? Can't afford to pay in full? Trying to figure out how to spread out payments over time? Then, you should use TaxCure to find a Hawaii-based tax pro. 

With TaxCure's search features, you can look for enrolled agents, CPAs, and tax attorneys based in Hawaii. Then, you can narrow down your results based on the exact problem you're having or the solution you want. Don't let state taxes stress you out — get help from a Hawaii tax pro today.