Key takeaways
- Hawaii S corporations file Form N-35, which is due April 20 for a calendar year, with the schedules the Department of Taxation lists beside it.
- The PTE election on Form N-362E must be made every year and is irrevocable for that year.
- A nonresident shareholder with no signed Schedule NS on file triggers a payment by the corporation at the top marginal rate.
- The Department's N-35 forms are still the 2025 revision, so confirm 2026 forms before you prepare.
What Hawaii requires from an S corporation
Under HRS 235-128, an S corporation that engages in activities in Hawaii must file an annual return in the form the Department of Taxation prescribes, reporting each shareholder's information. That form is Form N-35, S Corporation Income Tax Return. A federal Form 1120-S and its Schedule K-1 do not replace it, though the federal numbers feed it.
The Department lists the supporting forms on its S corporation page: Schedule K-1 for each shareholder, Schedule D, Schedule D1 for sales of business property, Schedule CR for credits, Schedule NS for nonresident shareholder agreements, Form N-4 for withholding statements and Form N-220 for underpaid estimates. When you open a Hawaii engagement, build the workpaper list from that page, not from last year's folder.
As of November 9, 2026, the N-35 and its schedules posted on the Department's site carry a 2025 revision date. Prepare 2026 returns on the forms the Department releases for 2026, and check the current instructions for any changed line numbers before you copy last year's mapping.
Due date and extension for tax year 2026
The statute sets the S corporation return due date by reference to the C corporation rule in HRS 235-97, which is the twentieth day of the fourth month after year end. For a calendar-year 2026 return, that is April 20, 2027. This is a different date from the federal S corporation deadline, so keep Hawaii on its own line in the tracker.
Estimated tax follows the same pattern. Under HRS 235-97, installments fall on April 20, June 20 and September 20 of the tax year and January 20 of the next year, and underpayment is charged at two-thirds of one per cent a month or fraction of a month. A missed installment of 6,750 dollars therefore costs 45 dollars for each month it is short.
On extensions, the Department's PTE page describes an automatic six-month extension of Form N-362E and Schedule PTE when the conditions in HAR 18-235-98 are met, moving the filing date to October 20. It also says an extension of time to file is not an extension of time to pay. I did not find extension wording for the N-35 itself in the statute, so read the extension paragraph of the current N-35 instructions before telling a client they have until fall, and have any balance paid by April 20 either way.
The PTE election: Form N-362E and Schedule PTE
An S corporation can elect to pay Hawaii tax at the entity level by timely filing Form N-362E, with Schedule PTE calculating the tax. For tax year 2024 and forward the rate is 9%. Tax year 2023 used the top individual rate. The election is made each year, binds all members for that year and cannot be revoked for that year.
Only individuals, trusts and estates are qualified members. A shareholder that is an entity does not qualify, which matters for S corporations with a holding company or an LLC among the owners. The Department's page says only qualified members may claim the PTE credit, so check shareholder types before recommending the election.
Act 58, signed May 15, 2025, requires a qualified member who claims the credit to add back the member's share of PTE taxes paid, for tax years beginning after December 31, 2024. That add-back applies to 2025 and 2026 returns. Run the owner's Hawaii individual return both ways before the election is filed, because the entity-level payment is not a free deduction anymore.
Electing entities must file and pay electronically, or the election is cancelled unless the Department grants an exemption on Form L-110. The Department's page says estimated payments are four equal amounts. Worked example: qualified members' Hawaii taxable income of $300,000 times 9% is 27,000 dollars, so each installment is 6,750 dollars on April 20, June 20, September 20 and January 20. For 2026, the first three have passed, so a client electing late has a January 20, 2027 problem to fix first.
Nonresident shareholders: Schedule NS and composite payments
HRS 235-128 requires the S corporation to file an agreement from each nonresident shareholder, which is the Hawaii S Corporation Agreement of Nonresident Shareholder (Schedule NS). The shareholder agrees to file a Hawaii return, pay tax on the Hawaii income and submit to the State's jurisdiction to collect unpaid tax.
If the agreement is not timely filed, the corporation must pay an amount equal to the highest marginal rate under section 235-51 on that shareholder's share of Hawaii income. The corporation can recover the payment from the shareholder. Example: an Oregon shareholder owning 40% of a company with $200,000 of Hawaii-source income has an $80,000 share, and the corporation pays the top-rate tax on the $80,000 out of corporate cash.
The statute also requires the Department to permit composite returns and composite payments for some or all nonresident shareholders. I could not read the current composite instructions, and the composite schedule with the similar N-342C name in the Department's form listing belongs to a renewable-energy credit, so do not use it for this. Ask the Department or read the N-35 instructions for the composite procedure before offering it.
Form N-4 is the withholding statement for a nonresident shareholder. Match it to the shareholder's Schedule K-1 so the shareholder can claim the credit on a Hawaii individual return.
What to collect from the client
Ask for the federal Form 1120-S with every Schedule K-1, the general ledger and a trial balance. Then split the Hawaii items: gross receipts and wages by location, property used in Hawaii, and any income earned outside the state. The N-35 depends on what the company did in Hawaii, not on where the bookkeeper sits.
Ask for a shareholder roster showing each owner's name, state of residence, entity type and ownership percentage on every day of the year. Request: "Please confirm each shareholder's state of residence on December 31, 2026, and tell us if any owner is a trust, an estate, an LLC or another company." The answers decide the PTE election and which Schedule NS forms are needed.
Request a signed Schedule NS from every nonresident owner before the return is filed, and a Form N-362E decision in writing from an authorized owner. Collect prior-year Hawaii estimates paid with dates, any Hawaii credits carried forward and the prior N-35.
Usual's request builder can hold the shareholder roster as a repeating block with a masked tax ID field and a file upload for each Schedule NS, so the firm sees which owner has not returned one.
Failure modes and fixes
The federal return is filed on time and Hawaii is forgotten. Put April 20 in the calendar for every Hawaii client the day the engagement letter is signed, and check Hawaii filing on the same list as federal extensions.
A PTE election is assumed from last year. It is a separate election each year, so confirm it in writing before April 20 and file it with Schedule PTE. Do not roll it forward from a prior-year workpaper.
A shareholder moved out of Hawaii mid-year and no Schedule NS exists. Treat that owner as nonresident for the part of the year they were, collect the agreement now, and tell the client what the corporation owes if it is missing.
The firm assumes N-35 must be e-filed. The Department's mandatory e-file page does not list N-35, but an electing PTE has its own electronic filing and payment condition. Do not mix the two when explaining it.