February 23, 1990

DEPARTMENT OF TAXATION ANNOUNCEMENT


RE: Treatment of Employee Business Expense Reimbursements for 1989 and
Errors Found on Hawaii Tax Forms As of February 20, 1990


EMPLOYEE BUSINESS EXPENSE REIMBURSEMENTS - IRS NOTICE 90-14.

The State will follow IRS Notice 90-14, which provides guidelines for claiming an adjustment on 1989 tax returns for business travel reimbursements. Reference to this notice is recommended to obtain the details of the procedures to follow when claiming this adjustment.

An adjustment to income may be claimed by employees on their 1989 income tax return, where the employees' business travel reimbursements were included on their Forms W-2 by their employers. Only those employees whose reimbursements were based on mileage and per diem rates and not those who were reimbursed on a dollar-for-dollar basis or in amounts equal to or less than the standard rates may claim this deduction.

If reimbursements are included in Box 10 of Form W-2, the taxpayer should claim a deduction on line 29 of Form N-12 equal to the lesser of the amount of reimbursement or the amount allowable under standard per diem and mileage rates. The "reimbursed expenses" should be identified as such on the dotted portion of line 29 and included in the total on line 29. The standard mileage rate for 1989 is 25.5 cents per mile.

INCOME TAX FORM ERRORS.

A number of errors have been found on 1989 Hawaii tax forms issued by the Department of Taxation. The list below reflects the errors as of February 20, 1990.
 
 
1. Instructions 
Form N-12
On Page 36, 1989 Tax Rate Schedules, references made to Form N-15 should be to Form N-12.  Likewise, references to Form N-15, Line 39, should be to Form N-12, Line 36.  The schedules themselves are correct.
2. Schedule D
(Form N-35)
On Line 11, the word "net" should be inserted between "...amount of..." and "recognized" and also the words "line 22" at the end of Line 11, which will then read "Enter amount of net recognized built-in gain from federal Schedule D (Form 1120S) (Attach copy) line 22.

On Page 2, disregard the "Caution" in the Instruction for Line 11.

3. Form N-141 Line 6, which reads: "Line 4 minus line 5. If the result is zero or less, stop here.  You cannot claim the credit." should read "Line 4 minus line 5.  If the result is zero or less, enter zero on line 12 and go on to line 13."
4. Form N-164 Line 36 refers to "all person use of vehicles."  This should be "personal" use.
5. Form N-184 In Section B, Part 2, Line 14, the line references to Schedules A should be Line 21 of Schedule A (Form N-12) or line 26a or 26b of Schedule A (Form N-15). On line 17, the totals of Columns b(i) and b(ii) should be separately indicated on the form and not combined.
6. Form N-311 Instructions for Part I, Section B, which reads in part, "In Section B below, list the names...support form the Department of Human Services, etc., form should be "from".

Instructions for the column headings for Part I, Section A, Columns 1 and 3 include the statement "Physically resided in Hawaii form more than 9 months...".  This should be "...for more than 9 months..."

The total line for Part I, Section A, which reads: "TOTAL BOXES CIRCLED" should be "TOTAL X's".

Page 2, Part II, Line 1, which reads: "Enter the amount form Part I, line 4 here" should read "Enter the amount from Part I, line 4 here."

Page 2, Part II, Line 3, which reads in part "Line 1 minus...Enter the total here an in ....", "an" should be "and".

Part III, Line 6, starting with "Add ines 4 and 5...." should read as "Add lines 4 and 5..."

Part III, Line 10 makes reference to "...bForm N-13..", which should be "Form N-13..".

7. Form N-858 Part I, line 5, paragraph 2 refers to Form N-1, line 56. The correct reference is Form N-12, line 56.
8. Schedule E Some versions have the word (N-12/N-15) "trusts" under the form title misspelled.

/s/
RICHARD F. KAHLE, JR.
Director of Taxation