Tag: Public Information Report

  • Stop Flirting with Generic Tax Advice: Five Texas Franchise Tax Myths

    Stop Flirting with Generic Tax Advice: Five Texas Franchise Tax Myths

    There is a lot of generic Texas Franchise Tax information online.  In order to stay in good standing and avoid unnecessary penalties and interest, business owners should consult with a tax professional to determine the best filing options to minimize tax liability.   Below are five Texas Franchise Tax myths I found online and the result of following generic tax advice.

    Myth #1 – The Texas Franchise Tax Filing Threshold

    • What they write: The threshold to file a Texas Franchise Tax report is $2.47 million
    • The Reality: The state of Texas updated the franchise tax filing threshold to $2.65 million for the 2026 filing.
    • The Result:   Any business relying on the old $2.47 million threshold will end up filing unnecessary tax reports.  For a business with $2.50 million in revenue, this would involve filing the franchise tax report when it is not required.  If the business ends up owing once the calculation is completed and the business pays any tax due, the business will have to file an amended return for a refund.  Once that is filed by a tax professional, the business will have to endure an administrative hassle with the Texas Comptroller to receive the refund.

    Myth #2 – Misleading Explanation of the EZ Computation

    • What they write: If a business earns between $2.65M and $20M, they must file an EZ Computation report.
    • The Reality: Filing the EZ Computation is not a requirement.  A business within the revenue parameter can choose to file franchise taxes using the EZ Computation form or file the Long Form.
    • The Result: The tax rate is a flat 0.331% on total revenue with zero margin deductions allowed on the EZ Computation form. For a service business or contractor with high payroll or cost of goods sold (COGS), forcing the business onto the EZ Computation form instead of running the Long Form with the Compensation or COGS method could cost thousands in overpaid tax.

    Myth #3 – Businesses Need to File a No Tax Due Report

    • What they write: If a business’ revenue is under the $2.65M threshold, they must file a No Tax Due Report with the Texas Comptroller
    • The Reality: Starting in 2024, the Comptroller completely eliminated the No Tax Due Report for entities under the threshold. These entities only file a Public Information Report (PIR) or Ownership Information Report (OIR).
    • The Result: This false tax advice leads a Texas business down an unnecessary hunt for reports that no longer exist and face penalties for missing the PIR or OIR filing.
    Read my blog for more information on penalties and interest for missed filing deadlines.

    Myth #4 – The One Size Fits All Texas Franchise Tax Extension

    • What they write: If a business files their Texas Franchise Tax extension by May 15, they are automatically granted a six-month extension to file.
    • The Reality: If a business is a mandatory EFT payer and paid $10,000 or more in franchise tax the prior year, Texas puts them on a two-step extension track. The May extension only buys the business time until August 15.
    • The Result: If the business does not pay the remaining tax balance and request a second extension by August 15, they will face late penalties and interest even if they thought they were fully extended.

    Myth #5 – Texas Has No State Income Tax Therefore No State Return

    • What they write: Texas does not have a state income tax.
    • The Reality: Many misinterpret this to mean Texas has no annual filing requirement.
    • The Result: Missing any filing requirement, whether it is the franchise tax return, Public Information Report, or Owner Information Report, will eventually result in penalties, interest, and potentially losing the right to transact business in the state.

    Stop Guessing with Texas Franchise Taxes. Put a Texas CPA in Your Corner.

    From choosing the right deduction method to navigating strict extension timelines, accurate filing requires dedicated Texas knowledge. Partner with a Texas CPA who will keep your business in good standing year after year. Book your consultation with Andris Financial Services and gain complete peace of mind for May 15th and beyond.

    Book Texas Franchise Tax Consultation

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  • The Steep Penalties for Overdue Texas Franchise Tax Reports

    The Steep Penalties for Overdue Texas Franchise Tax Reports

     Franchise Tax Reports Due Date

    If you have not filed your Texas Franchise Tax Reports yet, the late fee and interest penalties are already accruing.  If you have not filed your Public Information Report, the clock is ticking on your liability protections for your business.  Both reports were due on May 15 and the penalties for failing to file or pay taxes are significant.   Find out why failing to file either report can lead to fees and loss of your right to transact business in the state of Texas.

    Who is Required to File Texas Franchise Tax Reports?

    If you are not sure whether you are required to file franchise tax reports or which reports you need to submit, below are the three filing requirements per the Texas Comptroller:

    1. If the total annualized revenue for your business was under $2,650,000, you are not required to file a franchise tax return.  You are, however, required to file a Public Information Report.
    2. If your business did meet the $2,650,000 threshold, you are required to file a Franchise Tax Return and also file the Public Information Report.
    3. If you complete the Franchise Tax Report and your tax due is less than $1,000, your business does not owe any tax to the Comptroller.  Even though you do not owe any tax to the Comptroller, you are still required to file the Franchise Tax Report to show your calculations, and you are also required to file the Public Information Report.

    Franchise Tax Late Filing Penalties

    The state charges a $50 penalty for a late filed Franchise Tax Report.  The fee is assessed whether you subsequently file the report or any tax is due.  Meaning if you file your franchise tax report late and did not request an extension, the penalty is still due. For example, if your Franchise Tax Report is filed on May 20 and the Comptroller has not yet assessed the late filing penalty, you will be able to file the report and pay the amount due but the late penalty will be added later if not there already.  There is no grace period for filing the late report; it is due on May 15, no exceptions. 

    More Late Penalties and Interest

    On top of the $50 late filing penalty, the Comptroller also imposes a 5% penalty on the tax due if the tax is not paid when due.   If after 30 days the taxes are still unpaid, the Comptroller charges another 5% on top of the $50 late filing fee and the 5% for nonpayment when the report was due.  Sixty after the taxes are unpaid, interest begins to accrue.  The rate charged is 1% plus the prime at the beginning of the calendar year.

    No Annual Texas Franchise Tax Fee

    The state of Texas does not charge a franchise fee for doing business in the state.  Since there is not an annual franchise tax fee, the minimum requirement for all businesses in Texas is the Public Information Report.  Even though a business does not owe any tax, the state still has the ability to impose penalties for late or non-filers of the Public Information Report.   The penalty is the loss of liability protections for individual members of the business entity and loss of the business’ ability to defend itself against lawsuits.

    Falling into Forfeiture

    The Comptroller will mail a Notice of Intent to Forfeit Right to Transact Business if the business entity has not filed the Franchise Tax Return, Public Information Report. or has not paid the past due taxes, penalties, and interest.  The business has 45 days after receiving the forfeiture intent notice to make the account current.  If the business does not file or pay and is forfeited by the Comptroller, it has 120 days after the forfeiture to pay or file. Failure to pay or file results in Involuntary Termination by the Texas Secretary of State.

    Next Steps to Get Back in Good Standing

    As you can tell by the process above, simply missing a Public Information Report with the state can lead to losing corporate privileges and the right to transact business in Texas.  If you need to file Franchise Tax or Public Information Reports, it is never too late to file.  While your account may have incurred penalties, you can stop any further assessments on your account and potentially remove some of the fees.

    Contact Andris Financial Services for a consultation to determine which reports your business needs to file to erase compliance headaches.

    Schedule a Consultation Today!
  • The Registered Agent Trap

    The Registered Agent Trap

    Did your registered agent receive a notice of forfeiture from the Texas Comptroller of Public Accounts?  I have noticed a trend while working through forfeited entities with the state of Texas.  A recurring theme is the registered agent is a bookkeeping or tax service but the Texas LLC is forfeited by the Texas Comptroller.  There seems to be a disconnect regarding who is responsible for filing the annual reports to the state of Texas.

    When LLC formation documents are filed with the state of Texas, there has to be a registered agent assigned to the entity and on record with the Texas Secretary of State.  A registered agent is a person or office of the entity whom may be served any process, notice, or demand required or permitted by law to be served on the entity.  The registered office may the same as the entity’s place of business.  Some LLC’s use the same bookkeeping or tax service used to file their initial LLC formation paperwork as their registered agent.  This is where the discrepancy between what the business entity and the bookkeeper or tax service believe should be the duties of the registered agent.

    The registered agent has a duty to forward any correspondence to the business’ point of contact.  If the bookkeeper filed the initial paperwork for the LLC and there was not an agreement to file tax returns or annual information reports, it is the business’ responsibility to file or engage a third party to prepare and file their state public information reports.  One of the following actions are taking place leading to the state of Texas forfeiting an entities’ right to conduct business in the state:

    1. Registered agent with the Secretary of State receives the correspondence and is not forwarding the correspondence.
    2. The business is receiving the correspondence but thinks the registered agent bookkeeper or tax service is working with the Texas Comptroller.
    3. The business owner is confused because no tax is due and doesn’t know what to do.

    There are several LLC formation companies who provide LLC formation services but these are not tax compliance services.  It is important for a business to understand the state of Texas filing requirements.  For 2026 & 2027, the no tax due threshold is $2,650,000.00.  If you have sales less than this amount, you do not have to file a franchise tax return BUT you do have to file a Public Information Report with the Texas Comptroller.  There is no fee for a late Public Information Report filing however this does not mean the report can be skipped.  The following steps are taken by the Texas Comptroller if the report is not filed by May 15th:

    1. Texas Comptroller sends out a warning regarding the late report
    2. If the entity does not file within 45 days of the warning, the Texas Comptroller forfeits the entities’ right to conduct business in the state.
    3. After 120 days, the Texas Comptroller will notify the Texas Secretary of State of the forfeiture, and the entity is terminated in the state of Texas.
    4. At this point the entity’s name is up for grabs.   If another entity claims the name, the forfeited entity has to change their name.

    As you can see missing a report when there was no tax due causes major legal problems for entities.

    If a business does not have a tax department, it is crucial to hire a third party to file their state returns.  Since most businesses file federal tax returns, they should discuss adding state Public Information Reports reports to their tax filing packages.

    Any business owner can check the status of their entity with Texas Comptroller by navigating to the Texas Franchise Tax Account Status check below:

    https://comptroller.texas.gov/taxes/franchise/account-status/search

    For more information on how to reinstate your entity, refer to my reinstatement page.