Get Hawaii N 289 Template

Guide to Writing Hawaii N 289

Once a transaction involving Hawaii real estate with a non-resident seller is on the horizon, complexities regarding the withholding of tax emerge. The Hawaii N-289 form plays a pivotal role in navigating these complexities. It serves as a certification for exemption from the withholding of tax on the disposal of Hawaii real property by acknowledging specific conditions that negate the need for withholding. The process of completing this form, while straightforward, requires attention to detail to ensure the provision of accurate and complete information, which relieves the buyer from the obligation to withhold tax and informs the state about the nature of the transaction.

1. Start by entering the name of the transferor/seller at the designated space to indicate whose disposition of Hawaii real property is under consideration.
2. Input the transferor/seller’s identification number. Include only the last 4 digits of the Social Security Number (SSN) or the Federal Employer Identification Number (FEIN) in the space provided.
3. Fill in the transferor/seller’s address. If an individual, provide the home address; if a corporation, partnership, trust, or estate, provide the office address.
4. Check the applicable box that justifies why withholding of tax is not required:
   • If the transferor/seller is a resident person according to section 235-68, HRS, check the first box.
   • If the non-recognition provision of the Internal Revenue Code or any United States treaty applies, making the transferor/seller not required to recognize any gain or loss with respect to the transfer, check the second box, and fill in sections A and B as instructed. Section A requires a brief description of the transfer, and Section B requires a summary of the law and facts supporting the claim.
   • If the property has been used as a principal residence by the transferor/seller in the year preceding the transfer and the amount realized does not exceed $300,000, check the third box.
5. Sign and date the form at the bottom. The signatory asserts, under the penalties set forth in section 231-36, HRS, that the information provided is true, correct, and complete. The form must be signed by the transferor/seller or an authorized individual with the capacity to sign on behalf of the transferor/seller, such as a responsible corporate officer, a partner in a partnership, or a trustee, executor, or other fiduciary of a trust or estate. An authorized agent with power of attorney may also sign the form.
6. Print the name of the individual who signed the form.
7. Indicate the title of the individual signing the form (if applicable).
8. Lastly, do not send this form to the Department of Taxation. Instead, the completed form should be handed over to the transferee/buyer. It's their responsibility to retain the form and, if needed, attach it to Forms N-288 and N-288A when filing with the Department of Taxation.

Following the submission of Form N-289 to the transferee/buyer, the seller should ensure that all other obligations under the Hawaii Revised Statutes are fulfilled. This includes the filing of any required income tax return to report the disposition of the property. Although the form streamlines the process of exempting the seller from tax withholding, it is essential to consult with a professional to confirm that all financial and legal responsibilities have been met in the transaction.

FAQ Section about the Hawaii N-289 Form

1. What is the Hawaii N-289 form?

   The Hawaii N-289 form, also known as the Certification for Exemption from the Withholding of Tax on the Disposition of Hawaii Real Property, is a document that allows a seller (transferor) to certify that withholding of tax is not required when they sell or transfer real property in Hawaii. This could be because the seller is a resident, there are applicable nonrecognition provisions, or the property was used as a principal residence and the sale amount is within specified limits.

2. Who needs to complete the Hawaii N-289 form?

   This form must be completed by the transferor/seller of Hawaii real property when they believe withholding of tax is not required on their transaction under the conditions specified in the form instructions.

3. Where should the completed Hawaii N-289 form be sent?

   The completed form should not be sent to the Hawaii Department of Taxation. Instead, it should be provided by the transferor/seller to the transferee/buyer. The buyer is responsible for retaining the form and must attach it to other required documents if not all transferors/sellers provide a certification of exemption.

4. What are the main reasons someone might be exempt from withholding tax on the disposition of Hawaii real property?

   • The seller is a resident of Hawaii.
   • The sale qualifies under a nonrecognition provision of the Internal Revenue Code or a United States treaty.
   • The property was used as a principal residence, and the sale price does not exceed $300,000.

5. How do I know if I am considered a resident for the purposes of this form?

   A resident, for the purpose of this form, includes individuals who are residents under Hawaii tax law, corporations incorporated or registered in Hawaii, partnerships, LLCs, and trusts or estates that meet specific Hawaii residency criteria as outlined in the form instructions.

6. What if the Internal Revenue Service (IRS) has not issued my Individual Taxpayer Identification Number (ITIN) yet?

   If you've applied for an ITIN but have not received it, you should write "Applied For" in the section of the form that requests this number.

7. Is it necessary for all transferors/sellers to provide a certification of exemption for the buyer to be exempt from withholding?

   Yes, all transferors/sellers involved in the transaction must provide a certification of exemption to the buyer for them to be completely exempt from withholding. If not all provide such certification, the buyer must attach the provided forms to other necessary filings with the Department of Taxation.

8. What should I do if the sale of my property qualifies under the exclusion of gain from the sale of a principal residence?

   If the sale qualifies under this exclusion, you should check box number 3 on the form, indicating that the property was used as a principal residence and the sale amount does not exceed $300,000, providing necessary details as instructed.

9. Who must sign the Hawaii N-289 form?

   The form must be signed by the transferor/seller or their authorized agent. If the seller is not an individual, the form must be signed by a person with the proper authority, such as a responsible corporate officer or a trustee.

10. Where can I get more information about the Hawaii N-289 form and its requirements?

    For more information, you can contact the Taxpayer Services Branch in Honolulu directly by phone or visit the Hawaii Department of Taxation’s official website.

When filling out the Hawaii N-289 form, several common mistakes can lead to complications or delays in the processing of the exemption from the withholding of tax on the disposition of Hawaii real property. It's important to approach this paperwork with attention to detail and an understanding of the required information to ensure a smooth transaction. Here are nine of these mistakes:

1. Incorrectly identifying the transferor/seller’s status - Failing to accurately determine if the transferor/seller qualifies as a resident person under section 235-68, HRS, can lead to improper filing.
2. Using the wrong identification number - Not providing the last 4 numbers of the SSN or FEIN accurately can cause issues in identifying the correct party for tax purposes.
3. Providing incomplete or incorrect address information - It's essential to specify the correct and complete home address for individuals or office address for entities like corporations or trusts.
4. Not checking the applicable box correctly - Each box corresponds to a specific condition for tax exemption. Mischecking can misrepresent the transferor/seller's situation.
5. Omitting details in the description of the transfer (Section A) - A brief yet comprehensive description of the property transfer is necessary for clarity and proper documentation.
6. Leaving out the summary of the law and facts (Section B) - Neglecting to include a summary of the law and supporting facts for nonrecognition of gain or loss can invalidate the form.
7. Failing to consider the specific requirements for claiming a principal residence exclusion - The property must have been used as the principal residence, and the amount realized should not exceed $300,000.
8. Not accurately declaring the authority to sign on behalf of the transferor/seller - When the form is signed by someone other than the individual transferor, it’s necessary to affirm the authority to sign.
9. Forgetting to sign and date the form - An unsigned or undated form will not be processed, as these elements are crucial for the form's validity.

Remember, while the N-289 form doesn't need to be filed with the Hawaii Department of Taxation by the transferor/seller, it must be accurately completed and provided to the transferee/buyer. Ensuring that all parts of the form are filled out correctly and thoroughly will prevent delays and potential legal issues in the real property transaction.

When dealing with real estate transactions in Hawaii, Form N-289 plays a crucial role in certifying exemption from tax withholding on the disposition of Hawaii real property by non-resident sellers. However, this form is often accompanied by other documents and forms to ensure a smooth and compliant transaction process. Understanding these additional documents can help both buyers and sellers navigate the complexities of real estate dealings in Hawaii.

• Form N-288: This form, also known as the Preliminary Notice of Withholding, is used when a buyer is required to withhold tax from a non-resident seller. It serves as an initial notification to the Department of Taxation about the transaction.
• Form N-288A: Accompanying Form N-288, Form N-288A details the actual amount of tax withheld from the sale proceeds. This form must be filed with the tax payment to the Department of Taxation.
• Form N-288B: If adjustments are necessary after the initial withholding, Form N-288B is used to claim a refund or remit additional tax due. It allows for the correction of previously reported withholding amounts.
• Form N-288C: This form is essential for requesting a tentative refund of any excess withholding. Sellers can use this form to recover overpaid taxes before filing their annual income tax return.
• HARPTA Exemption Certificate: While not a form, this certificate is crucial for certain transactions that qualify for exemption from HARPTA withholding under specific conditions, similar to the exemptions addressed in Form N-289.
• Form P-64A: This is the Conveyance Tax Certificate, required for all real estate transactions in Hawaii. It must be filed with the Bureau of Conveyances, documenting the tax imposed on the transfer of real property.
• Title Insurance Policy: Although not a tax form, a Title Insurance Policy is often required in real estate transactions to protect against any title defects that were not discovered during the title search process.

Each of these documents plays a vital role in the complex process of real estate transactions, especially for those involving non-resident sellers in Hawaii. By ensuring the proper completion and submission of these forms and obtaining the necessary certificates and policies, parties involved can achieve compliance with state laws, avoid unnecessary delays, and ensure the protection of their interests in the transaction.

The Hawaii N-289 form is similar to other forms used across the United States that deal with real estate transactions, especially those focused on exemptions from withholding tax. Such forms are crucial for ensuring compliance with local tax laws while recognizing specific conditions under which sellers can be exempted from certain tax obligations.

IRS Form 8288-B is one example of a document that has similarities with the Hawaii N-289 form. This IRS form is used to apply for a withholding certificate for dispositions by foreign persons of U.S. real property interests. Like the N-289, Form 8288-B seeks to determine the appropriate amount of tax to withhold or to establish an exemption under specific circumstances, such as treaties between the United States and other countries that may reduce or eliminate the withholding requirement. Although IRS Form 8288-B is used primarily for foreign sellers, the core intention—to regulate tax withholding is an area of significant overlap with Hawaii's N-289 form.

Form 593, used in the state of California, also shares similarities with Hawaii's N-289. California's Form 593 is a Real Estate Withholding Statement that must be completed by the transferor/seller and given to the transferee/buyer, very much like the procedure for Hawaii's N-289 form. Form 593 covers various scenarios under which real estate transactions can lead to tax withholding exemptions or reductions, including the sale of a principal residence, similar to one of the exemptions mentioned in the N-289 form. While both forms serve to inform and regulate the tax implications of real estate transactions, they are tailored to the specific tax codes and exemptions of their respective states.

Form IT-2663, used by the state of New York, is another example that closely aligns with the Hawaii N-289 form in its purpose and use regarding real estate transactions. Form IT-2663 is required for nonresident sellers of New York State real property to calculate income tax due on the sale of property and potentially obtain a tax withholding exemption under specific criteria. This form, like the N-289, plays a pivotal role in the interplay between real estate transactions and state income tax obligations, ensuring that nonresident sellers are accurately accounting for their potential tax liabilities or exemptions based on their transaction's unique details.

When dealing with the completion and submission of the Hawaii N-289 form, a document designed to certify exemption from withholding tax on the disposition of Hawaii real property, careful attention to detail and adherence to regulatory requirements is crucial. Below are recommended dos and don'ts to guide you through this process effectively.

• Accurately complete all sections: Ensure that all requested information, including the transferor/seller's identification number and address, is accurately filled out. Inaccurate or incomplete information can lead to processing delays or the rejection of the form.
• Check the correct exemption reason: Carefully review the reasons for exemption provided in the form and check the box that accurately reflects your situation. This could be related to residency status, specific nonrecognition provisions of the tax code, or the sale of a principal residence that does not exceed the specified amount.
• Attach a brief description and summary where required: For certain exemptions, you need to provide a brief description of the transfer as well as a summary of the laws and facts supporting the exemption claim. Ensure these sections are completed concisely and accurately.
• Review the certification before signing: Before signing the form, thoroughly review the certification to ensure that all information is true, correct, and complete to the best of your knowledge. Remember, providing false information can result in penalties.
• Retain a copy of the completed form: After the form is completed and handed to the transferee/buyer, keep a copy for your records. This will be important for your personal recordkeeping and any future reference.
• Follow instructions carefully: Pay close attention to the specific instructions provided with the form regarding where to send it and who needs to sign it. This can prevent procedural errors.

• File the form with the Department of Taxation: The transferor/seller should not file Form N-289 with the Hawaii Department of Taxation. It is given directly to the transferee/buyer.
• Leave sections incomplete: Do not skip any sections or fields that are required. Incomplete forms can lead to significant delays in processing or even the non-acceptance of the form.
• Guess on any answers: If you are unsure about how to complete any part of the form or do not fully understand a question, seek clarification before proceeding rather than guessing or making assumptions.
• Forget to check eligibility for exemptions: Each exemption clause has specific criteria. Ensure that you qualify for the exemption you are claiming by thoroughly reviewing the relevant tax codes or treaty provisions.
• Sign without authority: Only individuals with the necessary authority or an authorized agent with power of attorney should sign the form. Signing without the requisite authority can invalidate the form.
• Ignore filing requirements for sales or dispositions: Remember that even if withholding tax is not required, you may still need to report the sale or disposition of Hawaii real property on your income tax return under section 235-92, HRS.

There are several misconceptions about Hawaii's Form N-289 that often confuse both sellers and buyers of real estate. It's important to clear these up for a smoother transaction process.

• Only non-residents need to complete Form N-289: This is not true. Form N-289 is specifically designed for transferor/sellers who are claiming an exemption from withholding tax due to being residents, recognizing no gain or loss according to specific provisions, or selling a principal residence under certain conditions. It is not only non-residents who need to deal with withholding tax concerns.

• Form N-289 must be filed with the Department of Taxation: The instructions clearly state that the transferor/seller should not file Form N-289 with the Department of Taxation for approval. Instead, it must be completed and given to the transferee/buyer, making it a transaction document rather than a tax filing.

• The form is complicated and requires legal assistance to complete: While it's always wise to consult with professionals when dealing with legal documents, Form N-289 is designed to be straightforward. The seller has to check the appropriate box that explains why withholding of tax is not required and provide some basic information about the transaction.

• Form N-289 is only for individuals: This misconception overlooks the fact that Form N-289 covers a wide range of entities including corporations, partnerships, trusts, estates, and limited liability companies. Therefore, not just individuals but also entities can use this form to certify exemption from withholding tax.

• If you complete Form N-289, you don't have to pay any taxes on the sale: Completing and submitting Form N-289 to the buyer exempts the seller from withholding at the time of the transaction, not from all taxes on the sale. Sellers are still required to report the sale on their income tax returns and pay any applicable taxes.

• Every real estate transaction requires this form: Not all transactions will require Form N-289. This form is specifically for situations where the seller is exempt from withholding tax under certain conditions, such as being a resident, the property being used as a principal residence, or a nonrecognition event under tax law.

Understanding these points can help avoid unnecessary confusion and ensure that real estate transactions involving Hawaii property are handled correctly. Always refer to the latest instructions and regulations or consult a tax professional for the most accurate guidance.

Understanding the Hawaii N-289 form can simplify the process of a real property transaction by ensuring that tax withholdings are correctly handled. Here are key takeaways:

• The Hawaii N-289 form is designed for the exemption from withholding tax at the time a non-resident sells Hawaii real property.
• It's essential that the form is completed by the transferor/seller and is handed to the transferee/buyer; it should not be sent to the Department of Taxation.
• This certification indicates one of three reasons tax withholding is not required: the seller is a resident, there's no recognition of gain or loss needed due to specific tax code provisions, or the property sold was a principal residence and the sale amount does not exceed $300,000.
• A resident person for this purpose includes a variety of entities, such as individuals living in Hawaii, partnerships, corporations, limited liability companies, and certain trusts and estates, specified under Hawaii law.
• If claiming exemption due to a nonrecognition provision of the Internal Revenue Code or under a treaty, a brief description of the transfer and a summary of the legal and factual basis for the exemption must be provided.
• The definition of "amount realized" includes cash paid, fair market value of other transferred property, and any transfer-related liabilities assumed by the buyer.
• Even if withholding is not required, the seller may still need to file a state income tax return to report the sale or disposition of the property.
• The N-289 form must be signed by the seller or their authorized representative, verifying that the information is true, accurate, and complete under penalty of law.

These points aim to help both the transferor (seller) and transferee (buyer) navigate the complexities surrounding the disposition of real property and the associated tax implications in Hawaii.