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State income tax on out of state income

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  • State income tax on out of state income

    My apologies if this has already been answered somewhere.. apparently "tax" is too short of a search term

    I'm wondering if anyone knows how to handle a Hawai`i state income tax return for a standard W-2 type job where the company is not in the state? e.g. taxpayer in Hawai`i, employeed by someone in another state w/o state income tax. I checked around on the gov't site and couldn't find an answer to that (plenty about Hawai`i companies paying employees outside the state, but not the other way around). I emailed the tax help email and got no answer. So I figured I'd ask you guys.

    In other states I've seen, you just do withholding and quarterly estimated payments or whatever. I'd imagine it's similar for Hawai`i, but I don't know if the GET or anything else works into that somehow. Obviously a contractor working for others in the state would end up having to deal with it, but it doesn't seem to have much to do with regular W-2 employees.

    Thanks!

  • #2
    Re: State income tax on out of state income

    I'm not positive on this but I think that the out of state employer is required to withhold state taxes from employees even though they are in other states. If they are licensed to do business in other states, they have to conform to those individual states tax laws.

    Someone please correct me on this if I'm wrong. When I've done payroll in this scenario, I've always withheld any taxes due on wages paid in other states & made monthly deposits and filed quarterly payroll tax returns.
    "Democracy is the only system that persists in asking the powers that be whether they are the powers that ought to be."
    – Sydney J. Harris

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    • #3
      Re: State income tax on out of state income

      Thanks for the response!

      That does make sense, though for example in my case they've never done it until I lived in Oregon. Maybe they were just flying under the radar. I lived in Arizona for a couple of years; AZ expected me to pay my own taxes if they didn't get withheld, and never gave me any troubles. Worked that way in OR for a little while too; the trouble started up when we actually got a physical office with several of us in it, and I suspect OR got on their case since we suddenly got withholding one day. As far as I know we have an employee in NY who also does his own withholding still.

      I'm just trying to do my homework on this ahead of time since we're still considering moving. My boss is cool with it, though I suspect them having to do a bunch of extra onesies accounting work for me might damper that.

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      • #4
        Re: State income tax on out of state income

        Ah ha, they got back to me! I'll go ahead and post the answer here in case anyone else ever wants to know.

        You will be subject to the Hawaii state income tax if the company you work for sends you here to do a job for them. The company you work for needs to withhold Hawaii state income tax from your wages and remit it to the Department of Taxation, therefore, it is required to apply for a Hawaii withholding ID number. If the company does not withhold, you will be required to pay estimated tax quarterly (Form N-1). Form BB-1, Basic Business Application (to apply for Hawaii withholding ID number) and Form N-1 are available on the website at www.state.hi.us/tax
        So I guess the answer is "yes". Companies are supposed to withhold for people living in the state and working for them, but if they don't, the employee can do it themselves.

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