State admits 2,079 tax bills bogus

The state said on Wednesday it mistakenly sent 2,079 balance-due notices in May and June to residents who paid their tax bills on time.

The erroneous bills, first reported by the Honolulu Star-Advertiser on July 25, caused concern among taxpayers, many of whom thought they owed more money and sent in additional checks.

At the time of the first newspaper story, the state Tax Department said it was unable to determine how many bad notices had been sent. On Wednesday the department released that number along with an explanation as to what caused the problem.

The erroneous bills were sent "due to delays in posting payments made by April 20th to taxpayers’ accounts," said Mallory Fujitani, Tax Department spokeswoman.

"Delays in posting payments to taxpayers’ accounts primarily occur when a taxpayer makes a payment by paper check," she said. "Processing a paper check takes substantially longer for the department to post compared to electronic payments."

During the months of January to June, the Department processed 691,273 paper checks and cash, she added.

The tax office didn’t say whether the problem could be fixed or whether it will happen again.

There have been other complaints against the tax office for taking double payments when taxpayers file electronically. The agency didn’t say how many people have experienced this problem.

The state’s recent blunder highlights ongoing problems with the Tax Department’s faulty computer system.

The state paid Montreal-based contractor CGI Group Inc. — the same vendor that built Hawaii’s troubled health insurance exchange — $87.5 million between 1999 and 2011 to modernize the Department of Taxation’s information technology system. It is now preparing to spend at least another $32 million to install a new system.

After the Star-Advertiser’s July story pointing out the mistake, the Tax Department acknowledged on its website incorrect letters had been sent to taxpayers who paid on time via paper check, and said the system would automatically generate a refund for those who sent in duplicate income tax payments.

Before the posting, it was unclear how taxpayers would be reimbursed. Tax Department call center operators didn’t inform callers that overpayments would be automatically refunded and, in at least one case, suggested the taxpayer stop payment on the check to prevent being charged double.