Unfiled Texas Tax Returns (2010–2024): File Now and Avoid Texas Comptroller of Public Accounts Penalties

According to the IRS, more than 7 million Americans, many of whom live in Texas, fail to file their federal tax returns yearly. Unfiled Texas tax returns can lead to costly IRS penalties, interest charges, and even enforcement actions such as tax liens or wage garnishment. For businesses, missing franchise or sales tax reports can trigger additional state-level consequences, including license suspension and bank levies.

Texas is unique because it does not have a state income tax for individuals. This means that most Texans only have to worry about filing federal income tax returns with the IRS. However, business owners still have state obligations. Corporations, partnerships, and other business entities must submit franchise tax reports to the Texas Comptroller each year, and those who sell taxable goods or services must file sales and use tax reports by their due date.

If you have unfiled tax returns from 2010 through 2024, the best time to resolve them is now. Filing late does not remove penalties immediately, but it stops additional failure-to-file charges from accruing and shows good faith to the IRS and Texas Comptroller. This guide will help you understand unfiled returns, the potential consequences of ignoring them, and the exact steps to get back into compliance. Whether you are an individual or a business owner, the information below will provide practical solutions to resolve your tax issues and protect your rights.

What Are Unfiled Texas Tax Returns?

Unfiled Texas tax returns refer to any required tax reports or forms not submitted by their due date. For most individuals in Texas, this means missing federal income tax returns with the IRS. Even though Texas does not impose a state income tax, residents must still file federal returns if their income meets IRS thresholds for the year. For example, a taxpayer who earns more than $14,600 in 2024 must file a return.

Businesses face additional state-level obligations. The Texas Comptroller of Public Accounts requires corporations, LLCs, and other business entities to submit yearly franchise tax reports. These reports are due May 15, though extensions can be requested in advance. Businesses that sell taxable goods or services must also file sales and use tax reports regularly, with deadlines based on monthly, quarterly, or annual reporting schedules. Failing to file these reports on time can trigger automatic penalties and interest charges.

Unfiled returns can apply to any tax period, whether last year or more than a decade ago. The IRS and Texas Comptroller keep tax account records that note which returns have been submitted and which are missing. These agencies will typically send notices or letters when a return is overdue, but they are not required to do so before assessing penalties. Understanding which returns are missing is the first step toward compliance.

Why You May Have Unfiled Returns

Taxpayers fall behind on filing for many reasons, and unfiled Texas tax returns are more common than most people realize. Understanding why this happens can help you address the root cause and prevent future problems.

Common Reasons for Late Filing

• Life Events: Many taxpayers experience significant changes, such as divorce, illness, or job loss, which often cause them to delay or completely miss filing deadlines.
  
  
• Financial Hardship: Some people avoid filing because they worry they will not be able to pay what they owe, which only leads to additional penalties and interest later.
  
  
• Lost or Missing Records: Taxpayers may postpone filing when they cannot locate essential documents like W-2s, 1099s, or business expense records.
  
  
• Business Closures: Business owners who shut down operations sometimes forget to submit their final franchise or sales tax reports to the Texas Comptroller.
  
  
• Misunderstanding Obligations: Many Texans mistakenly believe they are not required to file if they do not owe any tax, but the IRS still requires a return for recordkeeping purposes.

IRS and State Notices

The IRS often sends CP59 notices to alert taxpayers about missing returns, while the Texas Comptroller issues delinquency letters when franchise or sales tax reports are overdue. These notices include the tax year involved, the address where a response must be submitted, and a phone number to contact for assistance. Responding quickly helps reduce penalties and demonstrates good faith compliance.

Identifying the reason behind unfiled returns is the first step toward resolution. Acting quickly when notices arrive can prevent future issues and help Texans comply with federal and state requirements.

Consequences of Ignoring Unfiled Returns

Failing to address unfiled Texas tax returns can have serious financial and legal consequences. The IRS and the Texas Comptroller have systems to enforce compliance, and ignoring notices can worsen the situation over time.

Federal IRS Penalties and Enforcement

The IRS imposes penalties as soon as a tax return becomes late:

• Failure-to-File Penalty: The IRS charges 5% of unpaid taxes for each month a return is late, up to a maximum of 25%.
  
  
• Failure-to-Pay Penalty: This penalty is 0.5% per month of unpaid taxes, continuing until the balance is paid.
  
  
• Interest: Interest accrues daily on unpaid tax and penalties, increasing the total amount due.
  
  
• Enforcement Actions: The IRS can file a Substitute for Return (SFR) on your behalf, place a federal tax lien on your property, garnish wages, levy bank accounts, or restrict your passport for tax debts over $62,000.

Texas State Consequences

Texas does not have a personal income tax, but businesses face strict enforcement for unfiled franchise and sales tax reports:

• Late Filing Penalties: Each late franchise tax report has a $50 penalty. Additional penalties include 5% if the tax is paid 1–30 days late and 10% if paid more than 30 days late.
  
  
• Additional Enforcement: The Texas Comptroller can require a security bond, file tax liens, freeze bank accounts, and seize assets. Licenses and permits may be suspended, and criminal charges are possible for willful noncompliance.

Comparison 1: Federal vs Texas Penalties and Enforcement

1. Late Filing Penalty

• Federal (IRS): 5% per month, up to a maximum of 25%.
• Texas (Comptroller): $50 per late report.

2. Late Payment Penalty

• Federal (IRS): 0.5% per month on unpaid taxes.
• Texas (Comptroller): 5% if 1–30 days late, 10% if over 30 days late.

3. Interest

• Federal (IRS): Accrues daily on both tax and penalties until paid.
• Texas (Comptroller): Accrues on the tax due until payment is made.

4. Enforcement Tools

• Federal (IRS): May use liens, wage garnishment, levies, and even passport restrictions.
• Texas (Comptroller): May impose liens, freeze bank accounts, seize assets, or suspend business licenses.

5. Substitute Return

• Federal (IRS): Can file a Substitute for Return (SFR) on behalf of a taxpayer who fails to file.
• Texas (Comptroller): Not applicable.

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Ignoring these obligations allows interest and penalties to compound, turning a manageable balance into a larger tax debt. Acting promptly can stop additional charges and reduce enforcement risks.

Relief and Resolution Options

Once you know which years are missing, the next step is to update your tax account. Taking action as soon as possible will stop additional failure-to-file penalties and show both the IRS and the Texas Comptroller that you are acting in good faith.

Step 1: Request Tax Transcripts

Start by requesting your IRS transcripts to confirm which returns are missing and what income was reported yearly.

• Use the IRS Get Transcript Tool Online: Access your account and download transcripts directly through the IRS website.
  
  
• Call the IRS: To request your tax records by phone, call 800-908-9946 and speak with an IRS representative.
  
  
• Submit Form 4506-T by Mail: If online access is not available, you can complete and mail Form 4506-T to receive transcripts by mail.
  
  
• Access Texas Business Records: You can log in to the Comptroller’s Webfile system or visit your local field office to request information missing from the franchise tax or sales tax report.

Step 2: Gather and Organize Documents

Collect all necessary tax documents for the unfiled years. This includes W-2s, 1099s, business income and expense records, bank statements, and previous tax returns. Having complete records allows you to file and avoid additional notices later accurately.

Step 3: Prepare and File Missing Returns

File federal returns in chronological order, starting with the oldest year. Use the correct forms for each year and include all required schedules. For businesses, file all missing franchise tax reports and submit outstanding sales tax returns. If your case is complex, consider having a CPA, enrolled agent, or tax attorney prepare the returns.

Step 4: Apply for Payment Relief

If you cannot pay the full balance, the IRS and Texas offer relief options to help manage tax debt.

Comparison 2: Federal vs Texas Payment Relief Options

1. Installment Agreement

• Federal (IRS): Allows monthly payment plans for up to 72 months.
• Texas (Comptroller): Payment plans considered on a case-by-case basis.

2. Offer in Compromise

• Federal (IRS): May settle tax debt for less than the full amount owed.
• Texas (Comptroller): Not available — taxpayers must pay the full balance or qualify for a waiver.

3. Penalty Abatement

• Federal (IRS): Taxpayers may request relief through first-time abatement or by showing reasonable cause.
• Texas (Comptroller): Penalty waiver requests can be filed using Form 89-224.

4. Hardship Relief

• Federal (IRS): Offers “Currently Not Collectible” (CNC) status, which pauses collection.
• Texas (Comptroller): May allow delayed collection in cases of financial hardship.

Taking these steps can resolve unfiled returns and prevent additional penalties. Filing even when you cannot pay right away is far better than waiting, because it stops the most severe penalties and demonstrates compliance to tax authorities.

How to Respond to Notices and Letters

If you have unfiled Texas tax returns, you may eventually receive notices from the IRS or letters from the Texas Comptroller. These documents are time-sensitive and should never be ignored. Responding promptly can prevent additional penalties and stop collection actions from escalating.

IRS Notices

The IRS sends different types of notices depending on your situation.

• CP59 Notice: This notice alerts you that the IRS has no record of a tax return for a specific year. It will list the tax year and provide instructions for filing or responding.
  
  
• CP3219A Notice: This statutory notice of deficiency can follow if you fail to file. It explains that the IRS has created a Substitute for Return (SFR) based on third-party information. Taxpayers have 90 days to respond before the IRS assesses the tax.
  
  
• How to Respond: File the missing return immediately or contact the IRS if you believe the notice is incorrect.

Texas Comptroller Letters

The Texas Comptroller issues delinquency letters for unfiled franchise or sales tax reports. These letters include the period involved, the total balance due (if any), and the address where you must send payment or reports.

• How to Respond: Submit the missing report or contact the Comptroller at the phone number on the letter to request guidance. Quick action can prevent bank levies or license suspensions.

Addressing notices as soon as possible is critical. The longer you wait, the more interest and penalties accumulate, and the more likely enforcement actions will occur.

Professional Help and Resources 

Resolving multiple years of unfiled Texas tax returns can be complicated, especially if you are missing records or dealing with IRS enforcement. Professional assistance can make the process faster and less stressful by ensuring every return is filed correctly and on time.

When to Seek Professional Help

Consider working with a tax professional if you have more than one unfiled year, owe a large balance, or have received IRS or Texas Comptroller collection letters. Tax experts can file on your behalf, request penalty relief, and communicate with tax authorities to protect your rights.

Our IRS Account Transcript Service

The first step to resolving unfiled returns is confirming what the IRS has on file for you. Our IRS Account Transcript Service quickly retrieves your complete IRS account history and provides a plain-English explanation of each year. This helps you see which returns are missing, what income was reported, and where to begin filing.

Additional Resources

Other options include Low Income Taxpayer Clinics (LITCs), IRS Free File for simple returns, and official Texas Comptroller resources for business reporting. Professional support can save time, lower stress, and prevent costly mistakes when dealing with unfiled returns.

Frequently Asked Questions (FAQs)

How many years of unfiled returns do I need to file?

The IRS generally requires taxpayers to file at least the last six years of federal returns, though they can request more. Texas businesses must file franchise tax reports for every year they do business in the state. You can contact the Texas Comptroller in Austin or check their official site to find out which periods are missing from your account.

Can unfiled returns affect my credit or ability to buy property?

Yes, unpaid tax debt can lead to federal or state tax liens, which are recorded by financial institutions and may appear on your credit report. These liens can make buying property, getting loans, or qualifying for favorable interest rates harder. Filing your returns and starting a payment plan is the fastest way to lower your risk.

Are there exemptions or elections available for businesses?

Yes, Texas offers exemptions for businesses below the franchise tax no-tax-due threshold. Some corporations can elect to use the EZ computation method to simplify filing. Reviewing your business income and tax category will help you understand whether you qualify for exemptions or easier filing options, which can reduce your report preparation time and potential penalties.

What happens if I ignore IRS notices?

Ignoring IRS notices allows penalties and interest to continue to build, which increases the total balance due. Eventually, the IRS can levy bank accounts, garnish wages, and seize assets. They may also file a Substitute for Return on your behalf, which usually results in a higher tax bill. Always respond quickly to any letter or notice to protect your rights.

Can I get property tax relief or payment extensions in Texas?

Texas does offer property tax relief in specific hardship cases, especially for homestead properties or disaster-related situations. You may apply for a payment agreement or request an extension directly with your county tax office. Visit the county tax office page or the state comptroller site for information about available relief programs and eligibility requirements.

Is electronic filing available for old returns?

Electronic filing is usually available for the current year and one prior year. For older years, you must file paper returns and submit them by mail. The IRS provides free fillable forms online for previous years. These forms make the process easier and ensure your information is submitted accurately and on time.

How can I find free guidance to resolve unfiled returns?

You can find free resources through IRS Free File, which allows taxpayers who meet income limits to prepare and file simple returns at no cost. Low Income Taxpayer Clinics (LITCs) can also offer guidance and representation for those who qualify. These services help you understand your rights, respond to notices, and begin bringing your account into compliance.