Texas Delinquent Franchise Tax Notice: Complete Breakdown

Thousands of Texas business owners are caught off guard each year when a Texas delinquent franchise tax notice arrives in the mail. According to the Texas Comptroller of Public Accounts, more than 80,000 delinquency notices are issued annually to businesses that missed a filing deadline or payment. What begins as a simple oversight can quickly lead to growing penalties, forfeited rights, and the loss of a company’s legal standing in the state.

A delinquent franchise tax notice is more than just a reminder; it’s an official warning that your business has failed to meet required tax obligations under Texas law. The consequences can escalate rapidly, whether the issue involves an unpaid balance, a missing report, or an unfiled return. Ignoring the notice or delaying your response can result in significant financial costs, including additional interest charges, property liens, or business forfeiture. Acting quickly is essential to protect your assets and your ability to continue operating legally.

This guide provides a step-by-step breakdown of everything taxpayers need to know about handling a delinquent franchise tax notice in Texas. You’ll learn how to identify the type of notice received, understand what triggered it, and take the correct actions to resolve it. We’ll also explain how to request payment plans, seek penalty relief, and prevent future notices from occurring. With the right approach, you can turn a stressful situation into a manageable resolution and keep your business in good standing with the state.

What Is a Texas Delinquent Franchise Tax Notice?

The Texas Comptroller of Public Accounts issues a Texas delinquent franchise tax notice when a Texas business fails to file or pay annual franchise taxes. This notice is an official alert that your company has violated Texas Tax Code Section 171.001, which requires every taxable entity formed in or doing business in the state to report and pay franchise tax. Receiving this notice means your business account is not compliant, and immediate action is necessary to avoid serious consequences such as forfeiture or collection proceedings.

Definition and Purpose

A delinquent franchise tax notice is a formal written communication from the Texas Comptroller’s office. It notifies taxpayers that their business either owes unpaid franchise taxes or has failed to file a required report. The notice outlines the specific reporting period, the total balance due, and detailed instructions for filing or payment. Its primary purpose is to give taxpayers a final opportunity to correct errors, pay owed amounts, or submit missing forms before the state begins enforcement actions.

These notices also serve a legal function: they establish that the state has officially informed the business of its delinquency. This notification is required before the Comptroller can suspend business privileges, issue liens, or initiate property seizures. In essence, the notice is both a warning and an opportunity to voluntarily restore compliance before facing costly enforcement steps.

Common Types of Delinquent Notices

The Texas Comptroller issues several types of notices, each representing a different stage of noncompliance. Understanding which form you have received is essential, as it determines the urgency and next steps required.

Comparison of Texas Franchise Tax Notices

The following outlines the main types of notices issued under the Texas Franchise Tax system, including their purpose and the potential consequences if ignored.

1. Form 05-211 — Notice of Intent to Forfeit Right to Transact Business

Purpose: The first warning that the business’s right to operate may be forfeited.
Consequence if Ignored: Forfeiture proceedings begin within 60 days if the notice is ignored.

2. Form 05-212 — Notice of Forfeiture of Right to Transact Business

Purpose: Indicates that the business has officially lost its legal authority to operate in Texas.
Consequence if Ignored: Contracts become unenforceable, and operations are halted until the business is reinstated.

3. Form 05-213 — Notice of Forfeiture of Registration

Purpose: Applies to foreign entities registered with the Texas Secretary of State that have failed to comply with tax laws.
Consequence if Ignored: The entity loses its registration status and becomes unable to transact business in Texas.

4. Form 05-226 — Notice of Intent to Forfeit (Estimated Franchise Tax)

Purpose: Issued when the Comptroller estimates a company’s tax liability because required reports were not filed.
Consequence if Ignored: Accurate reports must be filed promptly to correct the balance and avoid further penalties.

Each notice includes identifying details such as the business name, taxpayer identification number, and the specific reporting periods. By understanding which form you received, you can determine how much time you have to respond and what corrective measures to take.

Notice Components and Layout

A Texas delinquent franchise tax notice follows a structured format designed to provide all necessary information for resolution. Key sections include:

Header Information: This section lists your business name, mailing address, and 11-digit taxpayer ID number. It confirms which entity the notice applies to and ensures that the correct business is being contacted.
Balance Details: The notice shows the total tax owed and any penalties and interest calculated up to the notice date. Businesses should compare these amounts with their records to confirm accuracy before making payments.
Reporting Periods: The notice specifies which delinquent tax years or reporting cycles. This helps you identify whether the issue stems from a missed filing, an underpayment, or an unfiled report.
Webfile and Contact Information: This provides your XT number for electronic filing through the Texas Webfile system and contact details for the Comptroller’s office. These details allow you to submit payments, file reports, or request assistance efficiently.
Due Date and Instructions: The notice outlines the exact time frame for responding or paying before forfeiture proceedings begin. If you fail to act by the due date, additional penalties and collection actions may follow.

Each notice component serves a specific purpose, ensuring taxpayers have the information to correct their accounts. Prompt action at this stage is the most effective way to prevent escalating costs, business suspension, and potential legal exposure.

Why Did You Receive This Notice?

Before resolving your account, it is essential to understand why you received a Texas delinquent franchise tax notice. Each notice is triggered by specific issues with filing or payment. Identifying the cause allows you to respond accurately, avoid repeated errors, and prevent further penalties.

Outstanding Balance or Late Payment

An unpaid franchise tax balance is the most common reason for receiving a delinquent notice. This happens when a business files its report but fails to submit full payment, pays only part of what is owed, or misses the due date entirely.

Failure to Pay on Time: When a payment is made after the original due date, the Texas Comptroller automatically applies a 5 percent penalty. If the payment remains unpaid after 30 days, an additional 10 percent penalty is added, creating a total late fee of 15 percent.
Partial Payments: Some taxpayers pay only a portion of their balance, believing it will pause collection actions. Unfortunately, partial payments do not stop penalties or interest from accruing; the remaining amount generates additional costs.
Unresolved Disputes: Even if you disagree with an assessment, failing to pay while disputing can trigger a delinquent notice. The state requires payment or security while a protest is pending to prevent further penalties.

Unfiled Reports or Missing Information

Many businesses receive delinquent notices not because they owe taxes, but because they failed to file required reports. Under Texas law, every taxable entity must submit annual filings, even if it owes no tax.

Annual Franchise Tax Report: Businesses must file Form 05-158 (Long Form) or Form 05-169 (EZ Form), depending on total revenue. Failure to submit either form can trigger a delinquent notice for non-filing.
Public or Ownership Information Reports: Every taxable entity must file Form 05-102 (Public Information Report) or Form 05-167 (Ownership Information Report). Missing these forms prevents the state from confirming company ownership details.
Combined Group Reports: Businesses in a combined group must ensure their information is correctly included in the parent company’s report. If not, each member can receive a separate delinquent notice for missing documentation.

Failing to file required reports can lead to penalties even when no tax is due. Filing the missing forms immediately is the fastest way to correct the issue and reinstate good standing.

Data Discrepancies and System Errors

The Texas Comptroller’s office uses advanced data matching systems to cross-check business filings against federal tax returns and Secretary of State records. If inconsistencies are found, a delinquent notice may be issued to prompt review.

Mismatch with Federal Data: When a business’s reported revenue or entity type differs from information submitted to the IRS, the state may flag the discrepancy as a potential filing error.
Processing Delays or Rejected Submissions: Electronic filings can occasionally fail due to incorrect XT numbers or transmission errors. If the Comptroller’s system does not record a report, it may mark the account as delinquent even if the taxpayer attempted to file.
Address or Contact Issues: Notices may be sent to outdated addresses, causing taxpayers to miss earlier correspondence. Keeping your business information current with the Secretary of State prevents such problems.

Recent Law Changes

Legislative updates can also cause confusion or missed filings. For tax year 2024 and later, the no-tax-due threshold increased to $2.47 million in annualized revenue. Businesses earning at or below this amount no longer need to file a No Tax Due Report. However, they must still submit a Public Ownership Information Report.

If your business did not file this required information report, you could still receive a delinquent notice even though no franchise tax is due. It is critical to verify whether new filing rules apply to your company each year to avoid unintentional violations.

Step-by-Step Guide to Responding to Your Notice

Receiving a Texas delinquent franchise tax notice can feel overwhelming, but responding promptly and correctly can help you avoid additional fees, unnecessary costs, and long-term damage to your business. The Texas Comptroller operates under state and federal law, meaning every communication, notice, or letter carries official weight. Following the correct process ensures that your business remains compliant and avoids further complications with state creditors or potential debt collectors.

Step 1: Review Your Notice and Account Details

Start by carefully reading your notice. Each letter from the Comptroller contains essential details that taxpayers must review in writing before taking any action.

Confirm Business Information: Verify that your business name, address, and 11-digit taxpayer ID number are correct. If your business is located outside Texas or operates from a home address, confirm that the mailing information matches your registration with the Secretary of State.
Check the Reporting Period: Carefully determine which tax period is delinquent for the reporting period. Note the due date on the notice and ensure it aligns with your company’s filing calendar.
Compare Balances: Review the total amount owed, including penalties, fees, and interest, when comparing balances. If any details seem incorrect, notify the Comptroller’s office in writing.
Locate Your Webfile Number: Your XT number, printed near the top of the letter, is required for electronic filing and payment submission.

Step 2: Request Account Transcripts

Before submitting payments or forms, ensure all previous filings have been appropriately recorded.

Contact the Comptroller: Call (800) 252-1381 or send a written request to obtain an official account transcript. This transcript confirms the original filing date, reported payments, and any remaining debt.
Provide Supporting Documents: When submitting your request, include receipts, confirmation emails, or proof of payments that the Comptroller accepted. This helps identify unrecorded transactions.
Compare Federal Data: If the IRS or another agency has different information about your reported income, provide matching records to the state. This ensures compliance under both Texas law and federal law.

Step 3: Confirm Filing Requirements

Once your records are verified, confirm which reports must be filed to correct the delinquency.

Identify Required Forms: Review the official Comptroller guidance to determine which forms apply to your business. Depending on your structure, you may need to submit Form 05-158 (Long Form), Form 05-169 (EZ Form), or Form 05-102 (Public Information Report).
Apply for Extensions if Needed: If you cannot meet the original due date, you may apply for an extension before it expires. Requests must be submitted in writing and received by the Comptroller before the deadline.
Confirm Group Status: Combined groups must ensure every member entity is reported correctly. If your parent corporation failed to include your company, it may trigger a separate delinquent notice.

Step 4: Calculate Correct Liability

After confirming all filing requirements, calculate your corrected tax amount.

Texas Franchise Tax Rates and Thresholds (2024–2025)

The Texas Franchise Tax rates and thresholds vary depending on the type of business. Below is a breakdown of the current thresholds and corresponding tax rates.

1. Retail or Wholesale Trade

Revenue Threshold: Up to $2.47 million — No Tax Due
Tax Rate: 0.375%

2. Other Business Types

Revenue Threshold: Up to $2.47 million — No Tax Due
Tax Rate: 0.75%

3. Combined Groups

Revenue Threshold: Based on aggregate group revenue
Tax Rate: Applies to each category (Retail, Wholesale, or Other Business Types)

If your calculations differ from the notice, write to the Comptroller with a clear explanation and attach documentation. Providing accurate and complete information helps ensure your records are updated and your debt is recalculated correctly.

Step 5: Choose Your Resolution Option

You can apply for relief or proceed with full payment depending on your situation.

If you agree with the notice, file all missing reports and make immediate payments using electronic filing. Submitting them early helps you avoid further fees and shows good-faith compliance.
If you disagree with the notice, submit your disagreement in writing with supporting documents. Clearly explain the reason for your dispute, and request a review from the Comptroller. Keep all copies of what you’ve submitted and the date they were sent.
You may apply for a payment plan or a financial hardship review if you cannot pay in full. These options are not free, but they may prevent repossession or default actions by the state.

Step 6: File and Pay Electronically

Using electronic filing simplifies the resolution process and minimizes processing errors.

Access the Webfile System: Go to the Texas Webfile portal and log in using your XT number. Texas businesses widely accept this secure online system.
Submit Required Forms: Upload any missing reports or information statements. Include the original filing date to demonstrate effort.
Select Payment Method: Choose between electronic funds transfer (EFT), credit card, or check. While credit payments may include processing fees, they ensure faster posting.
Retain All Records: Keep confirmation numbers and copies of your filings. These records provide proof of compliance and protect against future disputes.

Step 7: Verify Resolution and Maintain Compliance

Once your filings are completed, confirm that your account has been cleared.

Request Final Confirmation: Contact the Comptroller’s office or check your online dashboard to ensure your reports and payments were accepted.
Obtain a Certificate of Account Status: This official document verifies your eligibility to operate legally in Texas and that your business has met all filing and payment obligations.
Follow Written Guidance: The Comptroller often sends procedural guidance letters or updates for written guidance. Always read, note, and store them for future reference.

By following these steps, taxpayers can correct errors, reduce potential costs, and avoid further action. Staying proactive ensures your business remains in good standing with the Texas Comptroller and the Secretary of State.

Resolution and Relief Options

Resolving a Texas delinquent franchise tax notice requires more than just submitting a payment. The Texas Comptroller provides several legal and financial relief options to help taxpayers address unpaid balances, avoid repossession of assets, and prevent further enforcement actions. These programs are designed to support businesses facing genuine hardship while maintaining compliance with Texas and federal laws.

Payment Plan Agreements

If your business cannot pay the full amount immediately, you can apply for a payment plan. The Comptroller’s office allows taxpayers to make structured payments over several months, provided they meet all future filing and payment obligations.

How to Apply: Contact the Comptroller’s office in writing or by phone to request a payment arrangement. You will be asked to provide detailed financial information showing that your business cannot fully pay but can meet smaller scheduled payments.
Eligibility Requirements: Businesses must have filed all required forms before applying. Missing filings or unpaid penalties will delay acceptance. Entities outside Texas must confirm they are registered and in good standing with the Secretary of State.
Costs and Fees: Setting up a payment plan is not free. The state may charge administrative fees and assess interest until the balance is paid in full. Despite these costs, payment plans are far less expensive than forfeiture or repossession.

Penalty Abatement and Tax Relief Requests

Under certain conditions, the Comptroller may approve tax relief through a penalty abatement. This process allows partial forgiveness of penalties if a business demonstrates that circumstances beyond its control led to noncompliance.

How to Request Relief: Complete Form 89-224, “Request for Waiver of Penalty for Late Report and/or Payment.” The form must be submitted in writing, with a detailed explanation of the situation and supporting documents.
Accepted Reasons for Abatement: Medical emergencies, natural disasters, or system errors are typically covered. Evidence must explain why the failure occurred and confirm that the taxpayer acted promptly once notified.
Guidance and Review Process: Once received, your request is reviewed under the fair debt collection practices standards that ensure all taxpayers are treated consistently and respectfully. The abatement will appear as an adjustment on your account transcript if accepted.

Financial Hardship and Settlement Options

Businesses experiencing long-term financial difficulty may apply for alternative arrangements. While Texas does not have a formal Offer in Compromise program like the IRS, limited settlement agreements are available under specific conditions.

Debt and Hardship Review: The Comptroller considers the total debt, your cash flow, and potential community impact before approving a settlement. You must submit financial statements and tax returns for review.
Debtors and Creditors Consideration: Settlements are generally allowed when continuing collection would cause financial collapse. Both creditors and debtors benefit from structured settlements, as they prevent total business default.
Legal Oversight: The Comptroller’s collection division operates under federal law and state statutes, ensuring all settlements comply with the Fair Debt Collection Practices Act. This prevents unfair treatment and ensures all negotiations follow lawful procedures.

Enforcement and State Collection Practices

If a business fails to communicate or make payments, the Comptroller may initiate enforcement actions similar to those traditional debt collectors use.

Property Seizure and Repossession: The Comptroller can seize property, equipment, or assets if taxes remain unpaid. Once seized, assets may be auctioned to satisfy the debt. Businesses should act before repossession occurs to avoid losing valuable purchase investments.
Wage Garnishment and Employer Orders: When appropriate, the Comptroller may issue an order requiring an employer to withhold wages from the business owner or officers. This order remains in place until the debt is paid in full.
Permit Suspension: Any business permit or license issued by the state may be suspended after proper notice. Losing a permit can immediately stop operations and damage the business’s reputation.
Collection Costs: Besides taxes and fees, enforcement actions can create extra administrative costs, including attorney fees, auction expenses, and long-term credit impacts.

Failing to respond to these actions can result in loss of creditworthiness, additional penalties, and potential legal action under state and federal law.

Bankruptcy and Insolvency Options

When a business can no longer operate or pay its debt, filing for bankruptcy may be the final option.

Chapter 7 Bankruptcy: This process may discharge certain franchise taxes, but timing and eligibility rules vary. You should seek legal guidance before applying, as not all debts are dischargeable.
Chapter 11 Reorganization: Businesses that wish to remain active may use this option to restructure payments and protect property from immediate collection. Filing triggers an automatic stay that temporarily halts state collection efforts.
Professional Assistance: Always meet with a licensed attorney or tax professional before filing for bankruptcy. They can help you understand your rights and ensure your filing complies with Texas and federal laws.

Maintaining Good Standing After Resolution

Once your account is current, take proactive steps to stay compliant. The Comptroller will often send letters or notes with updates, guidance, and reminders about future deadlines.

Keep Accurate Records: Maintain detailed records of all correspondence, orders, and receipts related to your business. Store these documents in a secure home or office where they are easily accessible. Organized records help prevent errors and make audits or reviews much smoother.
Set Calendar Alerts: Create reminders in June, September, October, and December to stay ahead of important filing and payment deadlines. These are common reporting months for Texas businesses. Having alerts in place helps ensure you never miss a required submission or payment.
Notify the Comptroller Promptly: If your company changes its address, ownership, or structure, contact the Texas Comptroller’s office immediately. Send the notice in writing to confirm your update is recorded correctly. Doing so prevents missed notices, duplicate assessments, and possible penalties.

Timely responses and accurate communication keep your business compliant and prevent future notices or enforcement actions. With the right approach, even a serious debt situation can be resolved and your business fully reinstated under Texas law.

Frequently Asked Questions (FAQs)

Can I get professional help to handle my Texas delinquent franchise tax notice?

Yes, you may apply for professional tax assistance or consult a CPA located in Texas who understands state filing laws. While the Comptroller offers free public guidance, professional services often help reduce costs and prevent future penalties. Expert help can ensure your filings and payments are covered correctly in Texas regulations, whether you're a business or an individual taxpayer.

How much will it cost to resolve my delinquent franchise tax issue?

The total cost varies depending on the amount owed, how long the debt remains unpaid, and whether fees or interest have accumulated. You’ll usually also pay a small administrative fee for late filings. However, these costs are generally lower than the financial impact of business forfeiture or repossession. Prompt action minimizes both penalties and credit risks associated with unresolved tax debts.

Can I request more time to pay my Texas franchise taxes?

You can apply for an extension directly through the Texas Comptroller’s office. Requests must be made in writing and received before the original due date. The Comptroller may approve an extension if your business demonstrates good standing and prior compliance. Once approved, a confirmation letter or note will be mailed, providing details on your new order and payment schedule.

What happens if my business permit or property is seized?

If your business fails to pay, the Comptroller can suspend your permit or initiate repossession of property and assets. This process is legal and enforceable under Texas law. The state may auction seized items or purchase assets to recover the outstanding balance. Acting early—before an enforcement order is issued—helps protect your home, business equipment, and credit reputation.

Does the Texas Comptroller contact individuals directly by letter?

The Comptroller communicates through official letters to your registered business address or home. These letters contain detailed notes about the reason for contact, the order of actions taken, and instructions for resolution. If you receive a letter, respond immediately and verify it came from an official government source. Quick communication helps prevent further costs, penalties, or business suspension.

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