Clearing Your Name After State Income Tax and General Excise Tax (GET) Identity Theft in Hawaii

The Impact of Tax Identity Theft in Hawaii

Tax-related identity theft is a highly lucrative crime. In Hawaii, imposters do not just target individual state and federal income tax refunds; they also specifically target small business owners by hijacking their General Excise Tax (GET) license numbers. When a thief uses your Social Security Number (SSN) or Federal Employer Identification Number (FEIN) to file a fraudulent return, they pocket the refund, leaving you to deal with the fallout. You may only discover the fraud when your electronic tax return is rejected, or worse, when you receive an audit notice demanding thousands of dollars in unpaid taxes.

Filing the IRS Identity Theft Affidavit

If you discover that someone has filed a fraudulent federal tax return using your SSN, your first administrative step is to secure your account with the Internal Revenue Service, Honolulu. You must complete and mail Form 14039, FED, Internal Revenue Service, Identity Theft Affidavit. This sworn document alerts the IRS that your SSN has been compromised and that the return filed under your name is fraudulent. The IRS will flag your account, issue you an Identity Protection PIN (IP PIN) for future filings, and manually process your legitimate paper tax return. Be prepared for delays, as resolving tax fraud investigations can take several months.

Working with the Hawaii DoT to Freeze GET Accounts

Hawaii's tax system is unique because it assesses a General Excise Tax (GET) on nearly all business activities, governed by Haw. Rev. Stat. § 237-2. If an imposter steals your GET license number, they might use it to conduct illegal business operations or file false periodic returns. If you suspect GET fraud, you must immediately contact the Hawaii Department of Taxation, Honolulu or the Hawaii Department of Taxation, Hilo depending on your island. You should request a freeze on your GET account to prevent the imposter from racking up massive tax liabilities in your company's name. The state may require you to close the compromised GET license entirely and apply for a new, secure license number to resume your lawful business operations.

Handling Stolen Tax Refunds

One of the most frustrating aspects of tax identity theft is waiting for the money you are rightfully owed. If the imposter successfully stole your state or federal refund, the government agencies must conduct a thorough investigation before they issue a replacement check to you. You are legally entitled to your true refund amount, but patience is required. You will need to provide substantial proof of identity, such as a valid Hawaii driver's license, copies of your W-2s, and police reports, to prove that the initial bank account where the refund was deposited does not belong to you.

Defending Against Unwarranted State Tax Audits

Sometimes, the first sign of tax identity theft is a terrifying letter from the Hawaii Department of Taxation demanding an audit or attempting to levy your bank accounts for unpaid taxes you know nothing about. An imposter may have claimed massive, fraudulent business income under your GET number without paying the associated taxes. If you are targeted for an unwarranted audit, do not ignore the letters. You have the right to appeal adverse tax assessments. By presenting evidence of identity theft to the auditor, or by escalating the matter to the Hawaii Tax Appeal Court, Honolulu, you can have the fraudulent liabilities completely dismissed. We highly recommend consulting a local tax attorney to navigate these complex administrative hearings.

Frequently Asked Questions (FAQ)