Limited Liability Companies (LLCs) registered in Hawaii must understand tax obligations at both the Federal and State levels.
Failure to comply with necessary filings may attract undue penalties.
In this article, we will discuss the process of IRS tax return filing for Hawaii LLC, focusing on classifying the taxes, reporting the taxes, deadlines, and other relevant details.
Understanding Federal Tax Filing Requirements for Hawaii LLCs
Tax obligations for Singles Member LLCs in Hawaii
A single-member LLC in Hawaii is considered to be a disregarded entity. This means that the default position is:
- An owner’s tax return (Form 1040, Schedule C) will include all of the LLC’s income, deductions, and expenses.
- In the case there are employees, the business is also required to file both Form 940 (Federal Unemployment Tax Return) and Form 941 (Employer’s Quarterly Federal Tax Return).
- If the LLC chooses to be taxed as an S Corporation, then a Form 1120-S (U.S. Income Tax Return for an S Corporation) becomes due and Schedule K-1 must be issued to the owner to report his income share.
- Single-member LLCs have to also pay self-employment tax which is essentially the Social Security and Medicare tax.
Tax Obligations for Multi-Member LLCs in Hawaii
If a multi-member LLC candidate fails to select corporate taxation, it will be considered a partnership for tax purposes primarily. This classification entails taxing responsibilities such as:
- Filing Form 1065 (U.S. Return of Partnership Income) Form for reporting incomes and expenses of the LLC.
- Providing Schedule K-1 to every member outlining their share of profit along with loss which is often referred to as draw.
- Each member will personally declare and report their income under their individual income tax return (Form 1040, Schedule E).
- When opting for corporate taxation, the entity will now file Form 1120 (U.S. Corporation Income Tax Return) instead of 1065.
- LLC members who are also partners will have to pay self-employment tax on the pro-rata share of profits.
State Tax Filing Requirements for Hawaii-Based LLCs
Understanding the Hawaii General Excise Tax (GET) for LLCs
In contrast to most American states, Hawaii does not have a sales tax on businesses but has a more general, high tax known as the General Excise Tax (GET) which starts at 4 percent for most types of transactions.
- A GET rate of 4% is standard throughout the state for LLCs and it applies uniformly to business operations at every level of transactions, however, Oahu, Kauai, and Hawaii counties have an added 0.5 percent surcharge making the effective rate at 4.5 percent.
- LLCs are required to get a GET with the Hawaii Department of Taxation if they wish to operate their business from the state.
- Businesses are responsible for filing periodic GET returns using Form G-45, which is filed monthly, quarterly, or semi-annually depending on revenue.
- Filing Form G-49 corresponds to the annual return businesses undertake to balance the tax receipts of GET over the year.
Hawaii State Income Tax Requirements for LLC Owners
LLC owners in Hawaii pay state income tax which is based on a progressive system charged between a tax rate of 1.4 percent and 11 percent depending on income.
- Individual members of single-member LLCs are responsible for reporting income earned while in Hawaii using Form N-11 (resident) or N-15 (non-resident/part-year resident).
- Multi-member LLCs must report business income using the Hawaii Form N-20 (Partnership Return).
- LLCs that choose to elect corporate taxation must submit the Hawaii Form N-30 (Corporate Income Tax Return).
- All members within an LLC are responsible for reporting income from their capital interests and are liable to pay state tax in Hawaii according to their tax returns.
Employer Tax Responsibilities for Hawaii LLCs with Employees
If your LLC has employees, you have additional tax responsibilities, including:
- Registering with the Hawaii Department of Labor & Industrial Relations to comply with employment tax laws.
- Filing Form HW-14 (Hawaii Withholding Tax Return) ensures state taxes are deducted from the salary of employees.
- Filing Form UC-B6 (Unemployment Tax Report) to pay into the state’s unemployment insurance program.
- Settling obligations concerning employee taxes which include the FICA Social Security and Medicare payments.
Key Tax Filing Deadlines for Hawaii LLC Owners
Federal Deadlines:
- March 15: Due date for tax returns for Multi-Member LLCs (Form 1065) and S Corporations (Form 1120).
- April 15: Due date for Single Member LLCs (Schedule C 1040) and C Corporations (Form 1120).
State Tax Deadlines for Hawaii
- April 20: Hawaii GET (General Excise Tax) filings are due for quarterly filers.
- April 15: Due date for Hawaii state income tax forms N-11, N-15, N-20, and N-30
- Employer contribution deadlines may differ depending on the type of tax and how often it is submitted
Penalties for Late Filing
Many fines come with not submitting taxes on time. Unpaid taxes incur a 5% penalty monthly for a maximum of 25%. For state taxes in Hawaii, the penalties include:
- 5% maximum penalty of 25% for tax amounts owed each month.
- Daily accruing interest for overdue amounts.
- Additional fines owed from underreporting income or failure to pay GET.
- Not filing payroll tax returns can cost employers a lot in fines, and they may even get into legal trouble.
Step-by-Step Guide to Filing Taxes for a Hawaii LLC
Apply for an EIN (Employer Identification Number): Required for multi-member LLCs and any LLC that has employees.
Keep accurate financial records: Track income and expenses with EasyBooks bookkeeping software from EasyFiling for hassle-free bookkeeping.
File federal and state taxes before the deadline: Make sure all forms are sent to the IRS and the Department of Taxation of Hawaii.
File GET submissions: File using the Hawaii Tax Online (HTO) system or using paper submissions.
Make other necessary tax payments: LLC owners in need of paying more than $500 for taxes must pay estimated taxes every quarter using Form 1040-ES.
Talk to a tax expert: Tax laws can be complicated, a tax professional can make sure all the laws are followed and assist in maximizing deductions.
How EasyFiling Can Help File Hawaii LLC Taxes
Filing taxes for a Hawaiian LLC can be a difficult task considering federal and state requirements. EasyFiling assists its clients with filing and bookkeeping compliances to ensure that the business stays in good standing. Our specialists can:
- Help you prepare and file your federal and state taxes promptly.
- Calculate payments due and file General Excise Tax (GET) returns.
- Ensure compliance with IRS regulations as well as Hawaii State tax rules.
- Provide bookkeeping services to help manage outlays and maximize tax write-offs.
For more information on filing your Hassle-free taxes, reach out to EasyFiling and let the experts take care of your LLC’s tax fulfillment.
Frequently Asked Questions (FAQs)
Am I required to file a State return apart from the Federal return for Hawaii LLC?
Yes, the owners of an LLC based in Hawaii are required to submit a Hawaii state tax return coupled with a federal tax return depending on the business entity.
What is General Excise Tax (GET) and how does it impact my LLC?
GET is a broad tax levied on the carrying on of business activity in Hawaii. It is applied to every transaction conducted in the state and includes services, goods, leases, and rentals. LLCs are required to enroll and be assigned a GET number and file periodic as well as annual returns.
What It Means To Miss The Tax Filing Deadline?
You might accumulate penalties and interest from the IRS and the Hawaii Department of Taxation for any late filings. The penalty could be as high as 25% of the unpaid taxes.
Is It Possible For Me To Elect S Corporation Status For My LLC In Hawaii?
Of course! When submitting Form 2553 to the IRS, an LLC may choose S Corporation taxation. This could be beneficial, particularly for savings on self-employment taxes.
Is There A Franchise Tax For LLCs In Hawaii?
Not for LLCs, but other types of business entities have to pay franchise taxes in Hawaii. Nevertheless, LLCs are subject to the GET and state income tax.
Nabin Adhikari
