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:
- 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.
- 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.
- 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.