Zero Income? File Texas Franchise Tax for FREE – Avoid $1,000+ Penalties!

Hi everyone, my name is Loma and I teach entrepreneurs business and money management skills. And today's video is going to be about how to file your Texas franchise taxes even when you have zero income, because even if you have zero income, you're still required to file. So today I'm going to show you how to file zero income on your Texas franchise tax return. Okay, so the first step is to go to the Texas Comptroller's website. The address is comptroller.texas.gov/franchise-tax. /taxes/file-pay, and the link will be in the description. You'll want to choose Webfile eSystems login. If you don't already have an account, make sure you watch my other video. It'll show you how to set up your online account for the Webfile eSystems portal. The other video also shows you how to add your business to your online account, how to choose which taxes apply to your company, and add that to your profile. That way it'll show up automatically when you log in here on your My Taxpayer accounts. It'll show your taxpayer number, your business name, and it'll show you which type of tax that you are set up to file. Once you've got it set up, then the next step is to go ahead and log in. So once you've reached this stage and you can see your company name here and the franchise tax as the assigned tax and fee, go ahead and click on your company name. For this company, we're going to choose that we're filing zero income. And you have to keep in mind, the Texas Comptroller requires you to file your franchise taxes every single year regardless of whether whether or not you made any income. You have to at least file that you made zero income if that was the case for you. If you did make money, you'll need to watch my other video that shows you how to file your franchise taxes when you do actually have income. But today we're just going to show you how to file a franchise tax return where you made zero income. So in essence, the company may have been created but not used yet. Uh, you may have created it and you haven't gotten to the point where you've started making any income and you only have expenses With any of those scenarios, it's possible to have zero income, but you would still need to file this tax return every year because that is the responsibility that comes with setting up your account. Franchise tax returns are only required for LLCs, Incs, corporations, S corps. Any of that type of business structure would require you to file your franchise taxes. This does not apply to sole proprietors. So if you have a sole proprietor, you do not have to file a franchise tax return. But if you have an LLC, an Inc, or a a corporation or S corp, this video is for you. So under Select a Function, there's Webfile Pay, and then there's Account Self-Service. So today we're not looking to do any of the Account Self-Service, but you can if you actually need to do that. You have the option to request a certificate for termination. That's if you actually need a certificate to verify that you are closing your account, and you can only close your account if you're closing your business. You can also request a clearance letter for reinstatement. So those of you that had created an LLC or Inc. or S Corp or C Corp, any of these type of business structures, if you created the business with the state of Texas but then you didn't file your franchise taxes after a certain amount of time, if you've not been filing at all, you're going to end up forfeiting your ability to conduct business in the state of Texas. But to avoid that, just make sure you file your franchise tax every year. Again, even if you have zero income, just keep filing it until you decide you want to close down your company. If you decide that you're not going to conduct business using that name, then you would have to terminate it here with the Comptroller as well as with the State of Texas. So the clearance letter for a reinstatement, that's for anybody that failed to file their franchise taxes on a regular basis. And the State of Texas pretty much revoked their authorization for you to conduct business. And once that happened, what they would require is for you to come here to the Comptroller's website, catch up on all your filings, pay whatever you owe, and there's a $50 penalty for not filing each year that you didn't file. So you would need to catch up all of those payments, and then once you're in good terms, then you would come back here and request a clearance letter for reinstatement. So basically, the Comptroller would be able to verify with the state of Texas and let them know, hey, this company has done what it was supposed to do, it's caught up all of its tax returns, and it's also paid in full. Go ahead and reinstate their company name in the system. So that is the purpose of the clearance letter. And then the third option here is to change your franchise tax mailing address. So when you first created your LLC, Inc., Corporation, S-Corp, whatever it is that you created, if the mailing address that they have is not current, here's where you would update it. When you update it here on the Comptroller's website, they will submit it to the State of Texas' registration department, and then it'll get updated on that website as well with the Secretary of State. But moving forward, today we're here only to file a zero income due tax return. So the first option here you see is File a No Tax Due Information Report. Just click the bubble right there. The second one is File an Easy Computation Report. That would apply to somebody that had income. There's the File a Long Form Report. That again applies to somebody who had income. Then there's Request a First or Second Extension. Again, we wouldn't need to file an extension if you actually are filing on time. And then there's File a Public /ownership information report. Now, when we file this no tax due information report, it will cover the information reports that are due, and then you have the option to make a payment only for extension payments, and then there's view transaction history. So these are the different options under the Webfile/Pay, but today the only thing we're going to focus on is filing a no tax due report, and we're going to click continue here, and then it's going to show you which reports are available. Your annual report. Just click that option and click continue. It lets you know that you should confirm you're eligible to file the no tax due report, and it shows you which form should I file. And that's if you have a question about which form to file, but we already know that you don't have any income, and that is why we're filing a no tax due report. Then it says to gather all the business information you need to complete the report in advance, including information for all related entities. If filing a combined and/or tiered report, again, we're doing a simple example of, of one company, for example, an LLC that doesn't have any income, and that's what they're going to report today. It also lets you know that you have to complete the entire report. So while you're filing, there's not a save option. You have to get it all done in one session, and that the session will expire after 30 minutes of inactivity. But you can extend it if the— because the little popup will come up and you just click on that to extend the time if you need a little bit more time to answer a question. You shouldn't need it. This only takes a few minutes to file. And there's the additional system tips. If you need it, click Continue to reset the 30-minute timer. Reports due on or after October 1st, 2011 will be assessed a $50 late penalty when filed after the due date. This is the $50 late penalty that I talked about. If you don't file on time, or if you're going to have to play catch-up because you haven't been filing, or if you forfeited your LLC, then you'll have to come back here, catch up on all your filings, pay the $50 penalties for each year, and And once all that's done, you can request reinstatement. And at the end of it, you want to make sure you print your confirmation page and then save it for your records. We're going to click continue here. So the first question is combined group report. This refers to if you had multiple companies that are filing under one group. In this case, we are not. We were talking about basically a single owner LLC. And so for the question, is this the reporting entity of a combined group? The answer is no. Second question, do any of the entities in the combined group have a temporary business loss preserved? No. Basically, they're asking if carrying over losses from a previous year. We are not, and it still only applies to anybody who's filing a combined group report. Then the next section is asking about a tiered partnership election. Again, for this sample, we're only using the example of a company who is a single-owned LLC. So the question, will your total revenue be adjusted for the tiered partnership election? The answer is no. And then we'll click continue here. You will need to know your NAICS code. To find your NAICS code, click on link in the description and it'll take you to the website where you will describe what your business does, and then they'll give you different options for what the code would be based on your industry. And your NAICS code will be a 6-digit number. Then for the next section, it's about the accounting year. So your accounting year, the beginning date is what they want to know, and the ending date of your accounting year. Typically, for the sake of this example as well, the beginning date is going to be January 1st. The ending date for the year is going to be December 31st. So basically January 1st to the end of December. That's your accounting year, unless your business was based on the accrual method. Since you have no income, we're going to assume a cash basis accounting year, which starts from the 1st of January to the end of December. In the next section, we have the qualification questions. The first one is, is this a passive entity as defined in Chapter 171 of the Texas Tax Code? Applies to partnerships, but for this example, we were assuming a single owner LLC, so we're going to mark this as no. The second question is, Is this entity's annualized total revenue below the no tax due threshold? Well, you might be wondering what the no tax due threshold is. So the no tax due threshold, really all that means is if you don't make more than a certain amount, you won't owe any franchise taxes, but they still require you to file those tax returns. And that's why I have another video that you would watch once you actually do have income, because you would need to let them know how much you actually made. So in that video, I show you how to file if you do have income. So Texas is small business friendly in that you have the opportunity to grow your business to a certain level income-wise before they're actually going to hit you with the franchise tax. But as you can see here in the chart, you're going to have to make more than $1.2 million before you owe any franchise taxes. Zero income is definitely below the no tax due threshold, and that's why we were able to mark yes here. The next question says, does the entity have zero Texas gross receipts? The answer is yes. Next question is, is this entity a real estate investment trust called a REIT that meets the qualifications specified in Section 171.0002? For the sake of this example, we're going to assume it's not a real estate investment trust. So the answer is going to be no. And then last question in this section is, is this entity a new veteran-owned business as defined in the Texas Tax Code Section 171.0005. You'll have to answer that according to your situation. For the sake of this example, we're going to assume it is not a veteran-owned based business, so the answer is no here. But if you are a veteran, make sure you mark yes here. The last box asks you what was the total revenue for your business. The answer here is going to be zero, and they only want whole numbers here, so there's no cents, just the zero, because we're saying we had zero, absolutely zero income. Click Continue here. Okay, on this page, here's where they give you the opportunity to update your mailing address. Previously, we talked about that option at the beginning menu where it asks you if you want to update your mailing address. You can do that there. That would be if you had an update to your address and it was not time to file your tax return, then you can go ahead and update it using that option. But every year when you file your franchise tax return, they give you an opportunity to update your mailing address. For the sake of this example, I'm going to go ahead and update the address here. And remember, this address update is also going to be sent to the Secretary of State, which is where you originally registered your business. And that way, the public records will be updated in case anyone ever looks up your company. They'll be able to find this current address as well. Once you've updated the address, if you needed to, go ahead and click Continue. If it's correct already, go ahead and just click Continue. Okay, on this page, this is called the Public Information Report. So this information is available to the public to to know who the owner of the company is or who the managers or members are of this company. So you'll want to check and make sure that every line has the correct information. The first box is about the taxpayer, and it shows your information, and it shows your mailing address, which you just had the opportunity to update if you needed to. And then they have the principal office. You're going to fill that in here. Then the principal place of business is going to also be the same address, and you can just copy and paste that there. Now, if it's different for you, let them know. So the principal office is where you normally conduct your office business, and then where you actually conduct the business, whether you're creating things, manufacturing, whatever work it is that you do, where the actual business is conducting itself, that's the address you'll put in the second line. And then the next section here is about the officers, directors, managers, members, or general partners. So you'll want to make sure that everybody that's listed here is correctly listed, and it asks if they're a director or not. Make sure that's marked correctly. So it asks for the name, the title, whether or not they're a director, whether there's an expiration date to their role and then their address. So you would fill in all this information for each person. And in this case, you'll see that we have the same person listed twice, once as a director, once as the title as the chief executive. So in this case, we have a chief of operations and they're also a director. And we have a chief financial officer. That's a CFO. And then we have a CEO, which is, which is the chief executive officer. And you just have to make sure that if there's any expirations, that those are in there. And their updated addresses in the system. And if anybody else is involved, this is where you would go ahead and add additional lines here if needed. You would fill this out according to how you registered your company and make any adjustments for if there were any changes from the time you created it to now. The next section applies to if the company is owned by another company instead of owned by an actual person. So we're not going to say that the company is owned by another company company. We're just going to leave it blank because it's owned by a person for the sake of this example. And it asks in the next box if it's owned by a corporation. In our case, it is not, so we just leave that blank. Here it asks you who your registered agent in office is. The registered agent that you originally filed with the state of Texas— if it has changed, you'll need to update it here, but then you'll also have to file it with the state of Texas directly. There's an actual form you need to fill out over there on their website that you would have to submit if you have access to the SOS Direct system, that's the online system that the state of Texas has where you can file different forms. You would be able to change your registered agent there, and you would also have to pay a fee, which is $15 plus credit card fees if you pay by the credit card. But when you update it here, just know it does not update over there in the Secretary of State system. You can update mailing addresses here on the Comptroller's website, and it'll carry over to the state of Texas, but your registered agent and the address for your registered agent does not get transferred over to the state of Texas. You would actually have to file that form on the Secretary of State's website and pay the fee in order to get that updated. And the reason this is important is because the information that the Secretary of State has for you, as far as what your current information is, your mailing address, your registered agent, the registered agent's address, the owners of the company, the directors of the company, all of that information is public information. So when somebody looks up your company, that is all the information that they'll be able to get directly from the Secretary of State, and you want for that information to be up to date. Otherwise, you could forfeit your ability to conduct business in the state of Texas. So you want to keep everything up to date, especially the registered agent information. Now, that was the last section here on this page. There is a declaration statement. All you'll do is read the declaration statement here and check the box and click continue. Now, this is the review page, so you can look over all the information for the questions that we answered originally, the 3 nos we gave regarding the combined group, the no tax due questions. Then there was the mailing address and whether or not you need to update. That update should show here. Then there's the public information report and making sure that all of that looks good. And there's your registered agent section. Once you've reviewed everything on this page, you'll want to go ahead and click submit report. But if anything is not correct and you see that there's something that you missed or that you needed to change, go ahead and click edit and they'll unlock the sections for you to go back and fix anything that you needed to change. But if everything looks good, go ahead and click Submit, and you're all done. You have successfully filed your Texas franchise tax return with no tax due report, and this is for zero income. And as you notice, they did not ask you for any payment because you do not owe any taxes. Had you owed any taxes, they would have prompted you for a payment method, but in this case, you do not owe any taxes, and you have finished filing your franchise taxes, and this will show you your submission ID number along with the date and time that you filed for your proof of records that you actually filed and have complied with the rules with the state of Texas. So the last thing you want to do is click the Print This Page for your records and save this for your records. Now, in the future, if you did need a copy of this tax return and you couldn't find your copy, then you would come back here to the Comptroller's Webfile eSystems portal and log in, and then you would be able to look at a history of your previous filings and be able to get a copy there. But once you've saved the report, you are all done. Make sure you click log out and it'll take you back to the login page. I hope the instructions were pretty easy to understand. As you can see, everything was pretty simple, and I gave you a step-by-step tutorial on how to file your own zero income Texas franchise tax return. Now, don't forget, whenever you do start making income for your company, no matter how much it is, make sure you do watch that other video. When you start making income, that shows you how to report what you made, because even though you make less than the threshold of the $1.2 million, they still want you to report how much you actually made. So I covered exactly how to do that in the other video. Hopefully you found this video useful. If you're interested in learning more about this or other subjects like this, I teach courses on my website at www. B-A-M-M dot com. That stands for Business and Money Management. Don't forget to like, comment, and subscribe. Thank you for watching today.