How to File a Short Year Texas Franchise Tax Return

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Texas businesses organized as a corporation, partnership, limited liability companies and other professionally organized entities are subject to the Texas franchise tax. Sole proprietorship and general partnership entities, however, are exempt from this tax. The due date for this tax depends on the annualized amount of revenue the business earns during the year. Short-year filers may not owe tax, or owe reduced franchise tax. Even if your business meets the requirements for these benefits, you must still file the tax return.

Calculate your revenue for the year.

Calculate the number of days in your short-year reporting period. Count the first day as the day you were able to receive revenue. The last day in the period is generally the last day of the calendar year, or your last day of business. For example, if you begin business on December 1, and the period ends on December 31, the number of days in your short-year period is 31.

Determine your annualized revenue. For short-year return periods, you must average your income over the number of days in the year your report is based on. Divide your revenue by the number of days in the period. Multiply the result by 365 to determine your annualized revenue.

Complete the franchise tax return that applies to your annualized income level. If your annualized revenue is $1 million or less, file the no-tax-due return, or Form 05-163. If your annualized revenue is $10 million or less, you may file an E-Z computation return, or Form 05-169. If your annualized revenue is more than $10 million, you must file the long form Texas franchise tax return, or Form 05-158.

Complete Form 05-102, Texas Franchise Public Information Report. All entities subject to franchise tax report requirements, even when no tax is due, must file this report. Failure to file the report may cause your business to lose the right to operate.

Submit your return. If your company is still operating, your short-year tax return is due in May of the year following your reporting period. If your business closed, your return is due within 60 days of the date of closure. The Texas Comptroller recommends electronic filing through their website. This method includes software that reduces calculation errors and gives you correct tax forms based on questions you answer. If you owe tax, you may submit an electronic payment dated up to 30 days from the day of your submission.

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