The deadline to file franchise tax is fast approaching. Are you wondering what that is? Is your small or medium company required to file this tax? If you find yourself searching for answers to these questions, this article is for you. As a business owner, performing your duties and complying with all the tax requirements may sometimes be difficult and confusing. We pride ourselves on helping entities like yours understand their tax responsibilities, hence minimizing the chances of penalizing your company or business.
What Is Texas Franchise Tax?
Franchise tax or privilege tax is a levy paid for you to charter or operate your entity in Texas State. This tax based on the capital held by an entity is separate from the federal and state taxes based on the income.
Despite its name, the tax is not levied upon the franchise but rather for the entity or business to operate in Texas. Companies chartered in other states are also required to file this tax as long as they operate in Texas.
Do All Entities File the Franchise Tax?
Not all businesses are required to file and pay for this tax. Entities like nonprofit organizations, sole proprietorship businesses, fraternal organizations, and limited liability corporations do not need to file. All professional associations, banks, and other taxable entities must pay and file this tax.
When Is the Deadline?
The taxes should be filed by the 15th of May of each year or the next business day should the day fall on a weekend or legal holiday. Entities must file and pay the tax due one year before terminating, merging or converting its operations in Texas or within 60 days for entities outside the state.
Failure to file the reports does attract a fine of $50. The fine is applicable even if the tax isn’t due or if the filing will still be done after the deadline. An extra 5% and 10% penalties are assessed for late filing within the first 1 to 30 days and beyond 30 days.
The good thing is you can obtain an extension online if you submit all the appropriate forms before the due time.
Our experienced team of experts at COR Bookkeeping & Business Consulting is ready to guide and assist in fulfilling your tax responsibilities. Do not let your business accrue unnecessary penalties and fines. Contact us today for professional and timely service.