Who Must Pay the Underpayment Penalty
You may be charged a penalty if you did not pay enough estimated tax by any of the due dates or if you did not have enough Hawaii income tax withheld. This is true even if you are due a refund when you file your tax return. The penalty is figured separately for each due date. Therefore, you may owe the penalty for any earlier payment due date, even if you paid enough tax later to make up the underpayment. In general, you may owe the penalty if you did not pay at least the smaller of:
- 60% of your current year tax liability; or
- 100% of the tax shown on your previous year tax return.
Exceptions to the Penalty
You will not have to pay the penalty if either 1 or 2 applies:
- You had no tax liability in the prior year, you were a U.S. citizen or resident of Hawaii for the entire year, and your previous year Hawaii income tax return was (or would have been had you been required to file) for a full 12 months. You had no tax liability for the previous year, or if your total tax was zero or you did not need to file an income tax return.
- The total tax shown on your current return minus the amount of tax you paid through withholding and applicable tax credits is less than $500.
Special Rules for Farmers and Fishermen
If you meet both tests 1 and 2 below, you do not owe a penalty for underpaying your estimated tax.
- Your gross income from farming and fishing is at least two-thirds of your annual gross income from all sources for last year or this year.
- You filed your Hawaii return and paid the entire tax due prior to March 8..
Get federal Publication 505, Tax Withholding and Estimated Tax, for the definition of gross income from farming and fishing.
Waiver of Penalty
If you have an underpayment on line 16, all or part of the penalty for that underpayment will be waived if the Department determines that:
- The underpayment is due to a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
- In this tax year or the previous, you retired after age 62 or become disabled, and your underpayment was due to reasonable cause.
Please see the N-210 instructions for more information.