Video instructions and help with filling out and completing Why Form 4797 Refunds

Instructions and Help about Why Form 4797 Refunds

In this short video I want to go over some of the differences between reporting income on the Hawaii income tax return as compared to the federal US income tax return the first dollar amount entered on the Hawaii and eleven form is really on page two here let's zoom in on the first dollar amount which is going to be the federal adjusted gross income you pretty much have to complete your federal return before you can complete your Hawaii return looking at the federal return the income all should be reported here and some of the deductions here called adjustments subtracted from the gross income to get the AGI they adjust the gross income for federal here at the bottom of the 1040 form and you would rewrite it here in line 7 of page 2 up to n 11 now not all of the income and deduction rules are the same comparing Hawaii and u.s. tax laws so here in this part right here we're going to increase the federal adjusted gross income for income that's taxable to Hawaii but not taxable on the federal return for example if you're a federal civil service worker here in Hawaii or maybe in Alaska you know that the cost of living is much higher as compared to the regular mainland states so those federal workers get something called a cost-of-living allowance and it's a tax-free benefit only for federal income taxes so if that Cola allowance is not included in the federal aid but it is taxable for Hawaii so when you look at your w-2 form or your year-end pay stub for federal workers civil service workers now you're gonna see probably a cola or t Cola allowance amount and you have to add that in here in line 8 because that allowance is taxable now because of this adjustment it may affect other numbers on the Hawaii return as compared to fair amounts being reported for example state income tax reductions and state refunds may need to be adjusted because of this Cola either in the current year and also possibly affecting the next year's tax return another adjustment here in line 8 here called ers ers stands for Employee Retirement System if you're a Hawaii state employee or an employee of one of the counties in Hawaii you're possibly covered by the Employee Retirement System and it may require you to have a withholding to contribute into the pension plan your pension plan typically a 401k retirement plan if the employee contributes into the plan it reduces their take-home taxable pay and it would not be included here in the federal AGI but in the case of Hawaii laws for employees covered in the Employee Retirement System they're withheld pension contribution is taxable so you have to add it in here in line 8 also another type of income that's not included in the federal agent axe free interests municipal bonds but Hawaii only allows tax-free municipal interests for Hawaii or counties of Hawaii issued bonds so for outer state bonds the interests and outer state bonds let's see if a California water bond the interest on that bond is not here in the federal AGI but it's gonna be taxable added into the Hawaii AGI because it's not Hawaii related and then you have to add it into the Hawaii AGI here is a miscellaneous line for things to be added in an example would be state refund that's tax free for federal but taxable for Hawaii there may be other income or deductions let's go back to the federal return income or deductions that are adjusted based upon the modified federal AGI well what we're trying to figure out here in Hawaii return is the Hawaii AGI and it may affect those other amounts of income reductions and that's adjusted here in line 10 we take a subtotal and then add that subtotal to the federal AGI increasing the federal HDI but there is also adjustments to reduce the federal AGI some of them are listed here more detailed instructions can be found in the instructions for form and 11 a common the most common adjustments acuity benefit we learned in chapter 3 Social Security benefits could be taxable up to 85% included here in the federal a GI but Hawaii law says Social Security benefits are never taxable for Hawaii income tax purposes so any taxable Social Security benefits here in federal AGI we would rewrite it here in line 14 and eventually subtract it out another type of subtraction is employer funded pensions pension income a time income probably is included here in the federal but if that retirement income is funded by employer your contributions not employee contributions now that employer funded pension benefit is tax-free for Hawaii so we would put it here so let's say you have a 401k retirement plan both the employer and employee put or fund money into the plan let's say equal amounts 5050 contributions employer and employee that means now when the employee retires half of the retirement benefit would be tax-free excluded here now all other time the benefit would be included for federal but the employer portion eventually will be backed out and again by definition pension implies employer funded yeah so if you remember this ers withholding there has to be added back then that's considered to be even though it's coming out from employees pay for state and county employees it's considered to be employer pension in fact the employee already paid taxes on that contribution so that's gonna be tax-free now when it comes out as a retirement benefit here it says that for tax payers that are in the reserve not regular military service now but reserve or guard up to six thousand hundred ninety dollars of their pay for the year can be excluded other types of adjustments here not to comment there's a miscellaneous one