Tax Deadlines on Maui

by Tom Yamachika, President, Tax Foundation Hawaii

On August 18, 2023, the Internal Revenue Service announced “expansive tax relief” for Hawaii wildfire victims in Maui and Hawaii counties.  Generally, what that means is that if a tax filing or payment for an affected taxpayer is due between August 8, 2023, and February 15, 2024, then the filing or payment can be made on or before February 15, 2024, to file the returns or make the payments.

Examples given in the IRS news release include:

• Quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024.
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31, 2024.
• Calendar-year partnerships and S corporations whose 2022 extensions run out on Sept. 15, 2023.
• Calendar-year corporations whose 2022 extensions run out on Oct. 16, 2023.
• Calendar-year tax-exempt organizations whose extensions run out on Nov. 15, 2023.

For individuals who extended their 2022 returns until Oct. 16, 2023, and are impacted by the disaster, those returns can be filed on Feb. 15, 2024.  But the tax was due on April 18, 2023, before the wildfires started.  Remember, an extension of time to file a return doesn’t extend the due date of the payment, so a good faith estimate of the 2022 liability does need to be paid in if it wasn’t already.

The IRS also gave folks a magic code – “DR-4724-HI” – which needs to be written on any return claiming a casualty loss.  (This is actually the FEMA declaration number for the Maui wildfires.)  IRS also reminded folks that disaster relief payments are generally excluded from gross income, so income tax doesn’t need to be paid on payments for living expenses, funerals, or home rehabilitation.

This relief, of course, is granted only to taxpayers affected by the fires.  Taxpayers whose address is within the disaster zone, namely Maui and Hawaii Counties, including the islands of Lanai and Kahoolawe, generally qualify.  Taxpayers outside the zone should explain why or how they are affected in a statement attached to the return.  Acceptable explanations include:  (1) the taxpayer is a relief worker affiliated with a recognized government or charity and is assisting in the disaster area, (2) the taxpayer’s records were maintained in the disaster area, or (3) the taxpayer is an individual who was visiting the disaster area and was injured or killed.

The Hawaii Department of Taxation also came out with Tax Announcement 2023-03 to give tax relief.  The Department, however, only said that it will consider relief on a case by case basis.  “2023 Wildfire Relief” should be written in the top center of the return.  As with the federal returns, if a taxpayer’s address is outside the affected area, the taxpayer should explain how the disaster impacted it in a statement attached to the return.

Some folks have asked me why the Department isn’t offering blanket extensions like the IRS is.  It’s not because the Department is overly stingy.  It’s because there is a federal law, Internal Revenue Code section 7508A, empowering the IRS to grant these extensions.  That federal law was enacted as part of the Taxpayer Relief Act of 1997 and was signed by Bill Clinton.  Hawaii has nothing comparable.  So, the Department’s hands are tied a bit more when it comes to doling out relief.  If people think that the authority the Department has been given isn’t enough, they can speak with their legislators to have appropriate legislation proposed.