Filed a Texas Franchise Tax Extension? Here's What You Need to Know.

If you filed a Texas franchise tax extension, you may think you are off the hook until November 15, but that is not necessarily true.

Extensions Give You Time to File—Not to Pay

Most importantly, while an extension allows more time to file the actual report but it does not allow more time to make payment. For most taxpayers (those who owed less than $10,000 in franchise tax last year), your May 15^th extension request will only be valid if it includes payment of 100% of the tax due last year or 90% of the tax that will ultimately be due this year.

If you are a first-time filer, the 100% payment option is not available. If you failed to make sufficient payment, penalty and interest apply to any part of the 90% of tax not paid by the original due date. A valid extension is good for six months (November 15^th).

Owed $10K or More Last Year? The Rules Are Tougher

Taxpayers who owed $10,000 or more in franchise tax in the prior year are required to make payment electronically via Electronic Funds Transfer (EFT) and only get an initial 3-month extension (August 15^th).

Such taxpayers can make a second extension by paying an amount equal to the balance of 100% tax due on the actual franchise tax report. This second extension payment is due before August 15^th and extends the filing due date through November 15^th.

What Happens If You Don't Pay Enough?

Failure to meet the above requirements can result in an immediate 5% penalty, followed by another 5% penalty after 30 days (10% total). Interest will continuously accrue on any unpaid balances.

The Bottom Line

An extension gives you more time to file, but it doesn’t give you a pass on paying your taxes. If you missed the May 15^th deadline, now is the time to pay up and avoid additional penalties and interest.

Need help sorting through it all? Our state and local tax representative, Jon Wellington, is ready to walk you through the process, help you stay on top of any new obligations, and make sure your business is fully compliant.

To learn more about LGT and how we can serve you, contact us here.