If you receive income in the state of Hawaii, you need to know how to prepare Hawaii taxes. Hawaii taxes all forms of earned income received in the state. This means that if you are receiving wages, tips, salaries, or commissions from employment, these are taxable. Net self-employment earnings must also be reported to the state as income. Some forms or unearned income must also be reported, such as gambling winnings, bank interest, and pension payments.http://www6.hawaii.gov/tax/2010/n11ins.pdf 

All self-employed taxpayers and those who are operating a business will be required to file a tax return in Hawaii, even if the business is not making money. On the other hand, some employees will not have to file a return if they make less than the earned income threshold. These exempt taxpayers may find it advantageous to submit a return anyway, especially if they qualify to receive a refund.http://www6.hawaii.gov/tax/2010/n11ins.pdf

Start by gathering all of your essential tax paperwork. You will want to review everything to make sure you have the information you need. This includes the following:

1. Your Social Security number
2. Your current mailing address
3. The full name and Social Security number of your spouse, if you will be filing a joint tax return
4. Your total earned income during the year––If you are an employee, this will be reported to you on Form W-2 or Form 1099 as your total taxable wages. If you are self-employed, total your gross earnings and deduct your applicable business expenses.
5. The total unearned income you received that is taxable to Hawaii, including unemployment compensation, capital gains, and dividends
6. The state income taxes you have already paid––If you are employed, this will appear on your Form W-2 as state taxes withheld. Self-employed taxpayers will use the amount of estimated tax payments made.
7. A copy of your completed federal income tax return, if you will be filing onehttp://www6.hawaii.gov/tax/2010/n11ins.pdf 
   

The Hawaii tax return begins with the total of your federal adjusted gross income, so if you will be filing a federal return, complete that before you begin your state forms. If you will not be filing a federal tax form at this time, you may need to consult a tax preparer to help you calculate this amount.http://www.irs.gov/pub/irs-pdf/f1040.pdf

Now you need to begin preparing your state tax forms. If at all possible, consider filing your return electronically. The Hawaii Department of Taxation website offers free e-filing for eligible taxpayers via the E-Services portal. If you qualify to file a Form N-13 "Resident Individual Income Tax Return Short Form," you can e-file using this service. See the tax form instructions for qualifications to file using the short form. If you decide to file your federal income tax return using tax software or a tax preparation website, you will generally be given the option to attach your state forms for an additional charge. To file your state return electronically, follow the screen instructions and use the information you gathered earlier.https://www.ehawaii.gov/efile/

To file your return by mail, you will need to get paper copies of the tax forms. If you have access to the Internet, you can download Form N-11 "Resident Individual Income Tax Return Long Form" and the tax form instruction booklet from the Hawaii Department of Taxation website. If you do not have Internet access, these forms are usually available at the public library during tax season.http://www6.hawaii.gov/tax/2010/n11_f.pdf 

Begin the form by entering your full name and Social Security number, as well as your spouse's, if applicable. Complete the address section and choose the appropriate filing status and number of exemptions. Be sure to use the same filing status and exemptions as you reported on your federal return.http://www6.hawaii.gov/tax/2010/n11_f.pdf

At this point in the form, you need to read the form instruction booklet in its entirety. Be sure to review the sections regarding income adjustments and state tax credits to see if you qualify to use any of these on your return. If any part of the form seems confusing, you can consult the instructions for a full explanation.http://www6.hawaii.gov/tax/2010/n11ins.pdf

Look at page one of your IRS Form 1040 to find the amount of your federal adjusted gross income. Enter this figure on line 7 of your Hawaii return. Make any necessary additions or subtractions to income on lines 8 through 19 to calculate your Hawaii adjusted gross income on line 20. Subtract your standard or itemized deductions and exemptions to arrive at your state taxable income.http://www6.hawaii.gov/tax/2010/n11_f.pdf 

Consult the tax table to assess the amount of state tax due on your taxable income. Deduct any applicable state tax credits and any state income taxes you already paid through withholding or estimated payments. The amount left will be either a refund on line 46a or a balance due on line 47. Sign and date the completed form and have your spouse do the same, if necessary.http://www6.hawaii.gov/tax/2010/n11_f.pdf

Make a copy of the form for your records. Send the return, along with a check or money order for any balance due, to the address listed on the form. Be sure to submit both by April 20, 2011.http://www6.hawaii.gov/tax/2010/n11_f.pdf If you are unable to complete your state return before this date, you can learn how to get a state tax extension in Hawaii.