Texas Tax Relief Help: Business Tax Debt, Liens & Levies

‍What Comptroller Notice Did You Receive?

Select your notice type below to see what it means, the deadline, and your next steps.

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Texas Tax Relief Overview

Important: Texas does not have a state personal income tax. This page focuses on Texas business taxes and other taxes collected by the Texas Comptroller of Public Accounts.

Owing Texas state taxes is different from owing the IRS or states with income tax. The Texas Comptroller of Public Accounts administers taxes, including sales and use tax, franchise tax (margin tax), mixed beverage taxes, motor fuel taxes, and other business taxes. Because Texas has no personal income tax, most collection activity involves businesses and business owners.

Depending on your situation, you may need one or more of the following:

• A payment plan negotiated with the Comptroller's Enforcement Division
• An appeal if you received an audit result or determination you disagree with
• Penalty relief if penalties make the balance impossible to pay
• Lien release or levy resolution if collection action has started
• Filing help if you have unfiled Texas tax returns

Key difference from most states: Texas law prohibits wage garnishment for state tax debt under Texas Property Code § 42.001(b)(1). However, the comptroller can levy bank accounts and seize non-exempt assets. If you run a business in Texas and owe sales tax, franchise tax, or other business taxes, the stakes are high — especially because Texas has broad responsible individual liability under Tax Code § 111.016(b).

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What the Texas Comptroller Can Do to Collect

If you owe Texas state taxes and do not address the balance, the Texas comptroller has a range of collection tools. Not every case reaches the most serious actions, but the longer a balance goes unpaid, the more options the comptroller may use.

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Texas Business Tax Type Triage

Not all Texas business taxes are the same. Use this table to understand which tax you owe, the collection risk, personal liability exposure, and the key statute. Note: Texas has no personal income tax.

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Texas Tax Relief Option Comparison

Compare your options for resolving Texas Comptroller tax debt. Each option has different requirements, deadlines, and costs. Texas does NOT have a formal offer-in-compromise program.

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Texas Tax Payment Plans

If you cannot pay your Texas state tax balance in full, a payment plan may be an option. However, Texas payment plans are not standardized — they are considered on a case-by-case basis by the Comptroller's Enforcement Division.

What to Know About Texas Payment Plans

The Texas Comptroller considers payment plans on a case-by-case basis. The official Comptroller website does not publish a universal payment-plan formula, minimum payment, or maximum term. Taxpayers should expect individual review and ongoing compliance requirements. Contact the Enforcement Division at 800-252-8880 to discuss your specific situation.

Because payment plans are discretionary and require individual review, it helps to prepare your financial information before applying. A Texas tax professional can help you decide whether a payment plan is realistic for your situation.

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Texas Payment Plan vs. IRS Payment Plan

Many taxpayers also owe the IRS. If you need help with both, here are the key differences:

• IRS: Has formal, published installment agreement programs with standardized terms
• Texas: Case-by-case, no published terms, requires Enforcement Division approval
• IRS: Has an Offer in Compromise for qualifying taxpayers
• Texas: No formal OIC — only limited Insolvency Settlement Proposal
• Both: Interest and penalties generally continue to accrue

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Texas Penalty Relief

Penalty relief is different from a payment plan. A payment plan lets you pay over time. Penalty relief asks the comptroller to reduce or remove penalties when allowed under state rules.

Under 34 Texas Administrative Code Section 3.5, the comptroller may waive a penalty if the taxpayer exercised reasonable diligence to comply with Texas tax laws. The Comptroller considers the following factors:

• Your compliance history with Texas tax laws
• Whether returns were filed on time
• The size and sophistication of the taxpayer
• Whether tax was collected from customers but not remitted to the state
• Completeness of records and efforts to comply with recordkeeping requirements
• Whether a penalty waiver was granted in the past
• Reliance on advice from the Comptroller

Important Restrictions on Penalty Waiver

All of the following must be true to request a penalty waiver:

• All reports must be filed, and all tax due must be paid before requesting a waiver
• No waiver was granted in the past 2 years (unless extenuating circumstances exist)
• Maximum periods covered: 1 annual, 2 quarterly, or 6 monthly report periods
• Request must be within the 4-year statute of limitations
• No waiver if your bank account was frozen or seized
• No waiver if the collection was outsourced to a third-party collector
• Business must have an active Secretary of State registration

Interest Waiver

Interest waivers are rare and are only granted for state agency error or undue delay caused by the Comptroller. Do not count on interest being waived.

Forms

Form 89-224 — Request for Waiver of Late Filing/Payment Penalties

Form 89-225 — Request for Waiver of Electronic Filing Noncompliance Penalty

Each case depends on the specific facts and Texas rules. Documentation is almost always required. There is no guarantee of approval.

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Texas Tax Audit Results, Determinations & Appeals

A notification of audit results or notice of determination from the Texas Comptroller is a serious step. Once issued, it becomes the official amount the comptroller says you owe. If you ignore it, your options to challenge the balance may be limited.

Texas has one of the most detailed multi-level appeal processes among state tax agencies.

Appeal Deadlines

You have 60 days from the statement date on the Notification of Audit Results to file a Petition for Redetermination with a Statement of Grounds. For jeopardy determinations, the deadline is only 20 days. Missing this deadline can severely limit your options.

Texas Tax Appeal Process (Multi-Level)

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Refund Appeals

For refund denials, you have 60 days from the denial letter to file a Statement of Grounds or Notice of Intent to Bypass the Hearing.

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Texas Tax Liens

A tax lien is a public claim filed by the state against your property. In Texas, it is called a Notice of State Tax Lien. It can affect your credit, your ability to sell or refinance property, and your business operations.

How Texas Tax Liens Work

• Under Texas Tax Code Chapter 113, a tax lien arises automatically when a taxpayer owes tax, penalties, or interest to the state
• The lien attaches to all of the taxpayer's property that is subject to execution
• The lien becomes effective against a bona fide purchaser only after a Notice of State Tax Lien is filed with the county clerk in the appropriate county
• One tax lien notice is sufficient to cover all taxes of any nature administered by the Comptroller, including penalty and interest, that accrued before or after the filing (Texas Tax Code Section 113.006(b))
• The lien remains in effect until the taxpayer fully pays all taxes, interest, penalties, and fees
• A partial release may be granted if the taxpayer pays the reasonable cash market value of specific property
• A suit to challenge the validity of a lien must be filed in the Travis County district court within 10 years of the lien filing

Texas Homestead Protection: Texas homesteads are generally not subject to execution and are therefore protected from tax liens. This is a significant protection for Texas taxpayers.

To resolve a tax lien, you generally need to pay the balance in full or negotiate a settlement. Liens may remain on the public record even after the debt is paid unless steps are taken to release them.

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Texas Bank Levy / Order to Withhold

A bank levy allows the Texas Comptroller to freeze and take funds from your bank account to satisfy a tax debt. In Texas, this is called an Order to Withhold, a Notice of Freeze, or a Levy. This can create immediate cash-flow problems, especially if the account is used for daily expenses or business operations.

How Texas Bank Levies Work

• Under Texas Tax Code Section 111.021, the Comptroller may issue a notice of freeze or levy to any person who possesses or controls a financial account or other intangible or personal property belonging to the taxpayer, or who owes a debt to the taxpayer
• The notice is effective upon delivery
• The recipient (bank or financial institution) has 20 days to report the taxpayer's assets
• The recipient is prohibited from transferring assets for 60 days
• The Comptroller can then levy upon assets by delivering a notice of levy

50% Penalty on Non-Compliant Banks: Financial institutions that fail to comply with a freeze or levy order are liable for the funds transferred, plus a 50% penalty of the amount sought to be frozen or levied. This means banks take these notices very seriously.

Asset Seizure and Sale

The comptroller may also seize and sell non-exempt real and personal property at public auction within 3 years after payment becomes delinquent. After a seizure, at least 20 days' notice of sale is required.

Jeopardy Determinations

In cases where the comptroller believes collection is in jeopardy, a jeopardy determination allows immediate liens and levies and gives the taxpayer only 20 days (rather than 60) to file for redetermination.

If your account has been levied or frozen, you need to act quickly. A levy can sometimes be addressed, but the timeline is tight.

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Texas Wage Garnishment Protection for State Tax Debt

Texas has exceptionally strong wage protection laws. Unlike most states, Texas courts cannot issue wage garnishment orders for state tax debt.

Texas Property Code Section 42.001(b)(1) states that "current wages for personal services" are exempt from garnishment, attachment, execution, or seizure. The Texas Constitution, Article 16, Section 28, also prohibits wage garnishment. This is a blanket prohibition that applies to state tax debts.

Exceptions to the Wage Garnishment Prohibition

Wage garnishment IS permitted in Texas for the following limited situations only:

• Court-ordered child support
• Spousal support/alimony
• Federally guaranteed student loans in default (up to 15% of disposable earnings)
• Federal income taxes owed to the IRS
• Certain other federal debts

Important: Texas state tax debt is NOT among the listed exceptions to the wage garnishment prohibition. The Texas Comptroller cannot garnish wages for state tax debts.

But Watch Your Bank Account

Once wages are deposited into a bank account, they are no longer "current wages" and can be seized via bank levy. The comptroller regularly uses bank levies (orders to withhold) to collect tax debts. This is why the wage protection should not create a false sense of security — the comptroller has other powerful collection tools.

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Unfiled Texas Tax Returns

If you have not filed Texas tax returns for one or more periods, that can block most resolution options. The comptroller may estimate your tax and issue assessments based on those estimates — sometimes higher than what you actually owe.

Filing accurate returns can sometimes reduce an incorrect balance. But do not rush or file bad returns. It's better to prepare returns correctly with the right sales, deductions, and credits.

Important: Because Texas has no personal income tax, "unfiled returns" typically refers to:

• Unfiled sales and use tax returns
• Unfiled franchise tax reports
• Unfiled mixed beverage tax returns
• Unfiled motor fuel tax returns

Business owners who have unfiled returns should address them promptly. Penalties for failure to file can accumulate quickly, and the comptroller may estimate tax at the highest reasonable amount.

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Texas Business, Sales Tax, and Franchise Tax Debt

Business tax debt in Texas is higher risk than in many states. Sales tax is a trust fund tax — money you collect from customers that belongs to the state. The Texas Comptroller takes this very seriously.

Texas Sales Tax Trust Fund

Under Texas Tax Code Section 111.016(a), any person who receives or collects a tax or money represented to be a tax from another person holds the amount in trust for the benefit of the state. Sales taxes collected are state property, not company funds.

Responsible Individual Warning

Under Texas Tax Code Section 111.016(b), an individual who controls or supervises the collection or payment of tax and who willfully fails to pay or cause to be paid the tax is personally liable as a "responsible individual."

A "responsible individual" includes any officer, manager, director, or employee of a corporation, association, or LLC, or a member of a partnership (Section 111.016(d)).

The standard is two-part: (1) status as a responsible person (you control or supervise tax collection or payment), AND (2) willful failure to pay or cause to be paid. "Willfully" requires both knowledge and reckless disregard.

Dissolution of the business does NOT eliminate this liability.

Additional Officer/Director Liability

Under Texas Tax Code Section 171.255, if corporate privileges are forfeited for failure to file or pay franchise tax, officers and directors are personally liable for debts incurred during the forfeiture period.

Under Section 111.0611, officers and directors who participate in fraudulent schemes to evade tax are personally liable, including the 50% fraud penalty.

Texas Franchise Tax (Margin Tax)

Texas imposes a franchise tax (commonly called the margin tax) on most businesses. All taxable entities doing business in Texas must file an annual franchise tax report. Failure to file can result in the forfeiture of corporate privileges, triggering personal liability for officers and directors.

Texas Unemployment Insurance Tax

While Texas has no personal income tax, employers must pay state Unemployment Insurance (UI) tax administered by the Texas Workforce Commission (TWC). The UI tax rate for 2026 ranges from 0.32% to 6.32%, applied to the first $9,000 of each employee's wages. New employers pay 2.70%.

Business owners should not use current sales tax or franchise tax payments to pay off older debts without a plan. Doing so can create new liability and make the situation worse.

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Texas Tax Relief Tools & Calculators

Use our Texas calculators to estimate penalties, interest, or collection risk. Then request a review if the numbers show the balance is growing or collection is already active.

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Texas Government Resources

These are the official Texas sources for tax information, payment plans, appeals, and rules. Always check the official source for the most current information.

• Texas Comptroller of Public Accounts — Official tax agency website
• Comptroller File & Pay Portal — Online filing and payments
• Comptroller Penalties & Payment Plan Information
• Comptroller Penalty Waiver Information — 34 Tex. Admin. Code 3.5
• Texas Taxpayer Bill of Rights
• Publication 96-1253: Your Rights During a Tax Audit — Audit appeal process
• State Office of Administrative Hearings (SOAH) — Tax appeals
• Texas Tax Code Chapter 111 — Collection Procedures — Statute for collections, levy, and responsible individual
• Texas Tax Code Chapter 113 — Tax Liens — Statute for lien rules
• Texas Property Code Chapter 42 — Wage Garnishment Prohibition — Property Code Section 42.001
• Texas Warrant Hold System (Gov. Code 403.055) — Refund offset rules
• Texas Workforce Commission — Unemployment Tax — UI tax information

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Not Sure What to Do With Your Texas Tax Situation?

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Frequently Asked Questions

Does Texas have a state personal income tax?

No. Texas does not have a state personal income tax. This means there are no individual income tax returns to file with the Texas Comptroller, no individual income tax payment plans, and no wage garnishment for state income tax debt. However, Texas does impose other taxes, including sales tax, franchise tax (margin tax), mixed beverage taxes, motor fuel taxes, and unemployment insurance tax.

Can Texas garnish my wages for state tax debt?

No. Under Texas Property Code Section 42.001(b)(1), current wages for personal services are exempt from garnishment, attachment, execution, or seizure. This is a blanket prohibition — Texas courts cannot issue wage garnishment orders for state tax debts. However, the Texas Comptroller can still seize funds from your bank account through an order to withhold, notice of freeze, or levy once wages are deposited.

Can the Texas comptroller levy my bank account?

Yes. Under Texas Tax Code Section 111.021, the comptroller may issue an order to withhold or a notice of freeze or levy to any financial institution holding your funds. The notice is effective upon delivery. The institution has 20 days to report its assets and is prohibited from transferring assets for 60 days. Banks that do not comply face a penalty of 50% of the amount sought to be frozen or levied.

Does Texas have an offer-in-compromise program?

No. Texas does not have a formal offer-in-compromise program like the IRS and many other states. Texas does have a limited insolvency settlement proposal that may be considered before a State Office of Administrative Hearings (SOAH) hearing, provided evidence shows that the collection of the total amount would render the taxpayer insolvent. This applies when a business is insolvent, in liquidation, or has ceased operations, and the property value is less than the amount due.

What types of taxes does Texas collect?

Texas primarily collects sales and use tax, franchise tax (also called the margin tax), mixed beverage taxes, motor fuel taxes, and various business-related taxes. Employers must also pay state unemployment insurance (UI) tax administered by the Texas Workforce Commission. Because Texas has no personal income tax, most tax collection is handled by businesses rather than individuals.

Can I get a payment plan for Texas state taxes?

The Texas Comptroller considers payment plans on a case-by-case basis. To apply, contact your local comptroller field office or call 800-252-8880. Important conditions: your account remains delinquent during the plan, billing notices continue, a tax lien is still filed, state warrants remain on hold, and you must stay current on all new tax obligations. No payment plan terms are published officially; arrangements are made through the Enforcement Division on a case-by-case basis.

How does the Texas tax appeal process work?

Texas has a multi-level appeal process: Level 1: Independent Audit Review Conference (informal). Level 2: Redetermination hearing before the Comptroller's Hearings and Tax Litigation Division. Level 3: State Office of Administrative Hearings (SOAH), where an administrative law judge issues a proposal for decision. Level 4: The comptroller issues a final decision. Level 5: Motion for rehearing within 25 days. Level 6: Judicial review in Travis County District Court. You have 60 days from the statement date on the notification of audit results to file a petition for redetermination.

Can Texas file a tax lien against my property?

Yes. Under Texas Tax Code Chapter 113, a tax lien arises automatically when a taxpayer owes tax, penalties, or interest. The lien attaches to all of the taxpayer's property subject to execution. One notice of state tax lien filed with the county clerk covers all taxes administered by the comptroller that accrued before or after the filing. The lien remains until all taxes, interest, penalties, and fees are fully paid. Texas homesteads are generally protected from tax liens.

Can I get penalty relief from the Texas Comptroller?

Yes. The comptroller may waive a penalty under 34 Texas Administrative Code Section 3.5 if the taxpayer exercised reasonable diligence to comply. Factors include compliance history, timely filing record, taxpayer size, whether tax was collected but not remitted, completeness of records, and prior penalty waivers. Restrictions apply: all reports must be filed, all taxes must be paid, no waiver was granted in the past 2 years, and the request must be within the 4-year statute of limitations. Interest waivers are rare and are only granted for state agency error.

What is Texas's responsible individual liability?

Under Texas Tax Code Section 111.016(b), a responsible individual who controls or supervises the collection, accounting, or paying over of tax and who willfully fails to pay or cause to be paid the tax is personally liable. A responsible individual includes any officer, manager, director, or employee of a corporation, association, or LLC, or a member of a partnership. Dissolution of the business does not eliminate this liability. Additionally, officers and directors may be personally liable for debts incurred during a period when corporate privileges are forfeited for failure to file or pay franchise tax.

What is the Texas warrant hold system?

Under Texas Government Code Section 403.055, the comptroller operates a warrant hold system for refund offsets. When a payment is issued to a payee whose name appears on the hold list, the warrant is held, and the comptroller may offset held warrants against state debts. A notice of held warrants is mailed at least 30 days before an offset occurs. If the debt is settled within 30 days, held warrants are released. The comptroller must issue an overage payment for any remaining amounts after an offset.

How long does Texas have to collect a tax debt?

Texas generally has a 4-year statute of limitations on tax assessments. Collection can be pursued within 3 years after a determination becomes due and payable. After seizure of non-exempt property, the comptroller must provide at least 20 days' notice of sale. A suit to challenge the validity of a tax lien must be filed in the Travis County district court within 10 years of the lien filing.