Question: I have been living in Hawaii and paying individual income taxes for almost seven years. I file and pay quarterly estimated taxes, sometimes pay with a filing extension form and sometimes have tax balances to pay at filing time. The checks that I send in to pay those taxes, any of them, take several weeks to clear my bank account. Why does it take so long for these checks to be cashed by the tax collector? With the state, county and city always looking for sources of revenue, cashing checks immediately and putting those funds to use earning money as soon as possible would add money to the coffers of the government.

Question: In the May 7 Kokua Line about refunds, I would like to point out that the slowness works both ways. I mailed my federal and state tax returns April 3, along with my payment vouchers. IRS received and cashed my check April 9. The State of Hawaii did not cash my check, so I got worried, thinking that they did not receive my tax return. I called May 8 to check, and the lady said they received my tax return April 4 and processed it April 26. I saw later that they finally did cash my check May 8. Why so long?

Answer: Hard to believe, but the job of processing the state’s tax returns and payments is done manually.

That’s why it’s taking a minimum of two to three weeks for the Department of Taxation just to cash checks.

Consider that last year the department received 885,245 returns with payments. Of those, 564,903 were actual check payments, while 320,342 represented EFT (electronic fund transfer) payments.

"Recognizing that it is sound fiscal management for the state and its taxpayers to collect and deposit revenue when received, we are currently working with our bank and treasury staff (from the Department of Budget and Finance) to set up an interim solution" involving the "remote" depositing of checks, said Maria Zielinski, who was named director of the Department of Taxation in December.

"While we are currently working on the various issues, we believe this will enable (the department) to process tax revenue checks more efficiently," she said.

Meanwhile the department is hoping to implement a "modernized tax system" this year.

No cost figures were available for the new system "as we are in the middle of procurement," Zielinski said.

Manual Processing

"Unfortunately," Zielinski said, the processing of Hawaii tax returns and checks is "highly manual."

"While we are working on overhauling and updating our tax software system starting this year, it’s not an overnight solution," she said.

For now the process involves opening the mail, then "data preparation," in which staples are removed and returns placed in a specific order along with the check (if there is a payment), then scanning the return and check, she said.

After scanning, checks are separated from returns and sent to the cashiering area for deposit.

Asked about the number of staff available to process the returns, Zielinski said the number varies for each step — data preparation, scanning and cashiering — and figures were not readily available.

Under normal conditions, checks are deposited in two to three weeks, she said.

However, delays can be caused because of "bottlenecks, particularly in the scanning process," she acknowledged. "We only have three scanners, and when one has mechanical issues, it can delay the processing."

At this point the department is looking to lease a check scanner from its bank to enable staff to scan checks and get them "remotely" credited to the state’s account the following day.

"This could potentially remove the two-, three- or more-week delay that we are currently experiencing," Zielinski said. "However, because all processes before and after the remote deposit continue to be manual, we are working on logistics with the bank, cashiering and revenue reconciliation."

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