What Texas Form 05-163 Is For
Form 05-163 serves as a streamlined annual report for Texas businesses that don't owe franchise tax but must still check in with the Texas Comptroller's office. Think of it as telling the state, "We're still here and operating, but our circumstances mean we don't owe tax this year." For the 2021 report year (which covers the period from January 1, 2020, through December 31, 2020, and was due May 15, 2021), the no tax due threshold was $1,180,000 in annualized total revenue.
Who Qualifies to Use This Form
The form applies to several categories of entities:
- Businesses with total annualized revenue at or below $1,180,000
- Passive entities earning at least 90% of income from passive sources
- Real Estate Investment Trusts (REITs) meeting Texas Tax Code qualifications
- Entities with zero Texas gross receipts
- Qualifying new veteran-owned businesses during their first five years
Required Companion Forms
Even if you file Form 05-163, you must also submit:
- Form 05-102 (Public Information Report)
- OR Form 05-167 (Ownership Information Report)
These are mandatory to complete your franchise tax filing requirements.
When You’d Use Texas Form 05-163
Annual Filing Deadline
The standard deadline is May 15 each year. If it falls on a weekend or holiday, it shifts to the next business day.
Final Reports for Closed Businesses
File a final report within 60 days after your business ends its Texas operations or dissolves.
Filing Extensions
You can request an extension using:
- Webfile system
- Form 05-164
Extended deadline is typically November 15.
Late Filing Consequences
- $50 penalty for late filing
- Possible forfeiture of business rights
- Potential personal liability for owners
Amended Filings
To correct errors:
- Mark the form "Amended"
- Include a cover letter
- Mail or fax to the Comptroller
Key Rules or Details for Tax Year 2021
Revenue Threshold Rule
- Must be $1,180,000 or less (annualized total revenue)
- Based on gross revenue, not profit
Annualization Requirement
If operating less than 12 months:
- Divide revenue by days in operation
- Multiply by 365
Passive Entity Requirements
To qualify:
- Must be a partnership or trust
- 90% of income must be passive
- Rental income does NOT count
Special Entity Qualifications
- REITs qualify regardless of revenue
- Zero Texas gross receipts qualify
- Veteran-owned businesses qualify for 5 years
Electronic Filing Requirement
All reports must be filed electronically via Webfile (since 2016).
Step-by-Step (High Level)
Step 1: Determine Eligibility
Verify revenue threshold or qualification type.
Step 2: Gather Required Information
- Texas taxpayer number
- Entity details
- Accounting year
Step 3: Access Webfile
Log in or create an account at the Comptroller’s system.
Step 4: Complete Form 05-163
Select your qualification reason and complete required fields.
Step 5: Complete Required Information Report
- Form 05-102 (PIR)
- OR Form 05-167 (OIR)
Step 6: Review and Submit Electronically
Double-check accuracy and submit.
Step 7: Maintain Documentation
Keep records for at least four years.
Common Mistakes and How to Avoid Them
Forgetting the Information Report
Always file PIR or OIR with Form 05-163.
Misunderstanding the Revenue Threshold
Use total gross revenue—not net income.
Filing Paper Instead of Electronically
Use Webfile to avoid delays and compliance issues.
Incorrect Annualization
Use the proper formula for short-year calculations.
Missing the Deadline
Set reminders and request extensions if needed.
Passive Entity Misclassification
Ensure income meets the 90% passive requirement.
What Happens After You File
Processing Timeline
Electronic filings are processed faster—typically within weeks.
Business Status Update
Your status updates in the Texas Taxable Entity Search.
Public vs. Confidential Information
- PIR data becomes public
- OIR data remains confidential
Proof of Filing
You’ll receive a confirmation number—save it.
Notices or Issues
Respond within 30–45 days if contacted by the Comptroller.
Future Filing Requirements
You must file annually if still active. Note:
- Thresholds may change yearly
- Form 05-163 was discontinued starting 2024
FAQs
If my revenue is slightly below the threshold, should I file Form 05-163 or a regular franchise tax return?
You should file Form 05-163 because you qualify for No Tax Due status. Filing an EZ Computation or Long Form would be unnecessary and create more work. However, calculate carefully—if you're close to the threshold, double-check your annualization and make sure you're including all revenue sources. If there's any doubt, filing a tax return showing zero tax due provides more protection.
Do I need to file Form 05-163 if my business was inactive all year?
Yes, if your entity is still registered, you must file. An inactive business with zero revenue qualifies for Form 05-163. If permanently closed, consider filing a final report and dissolving your entity.
Can I file Form 05-163 if I'm part of a combined group?
Yes, if the combined group's revenue meets the threshold. You must also file Form 05-166 and ensure each member files its own information report.
What if I filed Form 05-163 but later realize I actually owed tax?
File an amended return immediately using the appropriate form (EZ or Long Form), include payment, and attach an explanation.
Do I need a tax professional to file Form 05-163?
Not always. Simple cases can be self-filed, but complex situations may require a CPA to avoid costly mistakes.
I missed the May 15 deadline and didn't request an extension. What should I do?
File immediately. Pay the $50 penalty and check your business status. Delays increase risks.
How long should I keep records related to my Form 05-163 filing?
Keep all records for at least four years after filing to cover audit periods.
