Texas tax amnesty program, relief for taxpayers

Your Guide to State, Local, Federal, Estate + International Taxation

tax amnesty, Texas, tax, amnestyThe general definition of amnesty is “a general pardon for offenses against a government.” It’s a reprieve. Recently, Texas announced a tax amnesty program that runs through June 29, 2018. What does this mean? It means the program will provide delinquent taxpayers with relief from penalties and interest on tax due. In today’s environment, States are continually looking for sources of revenue. This provides taxpayers that are liable for tax due in Texas to come forward without getting hit with penalties and interest.

Eligible taxpayers that can participate in the amnesty program include those who:

  • Did not file for periods before Jan. 1, 2018; or
  • Underreported taxes or fees due for any reason, such as erroneously claiming credits or deductions.

The amnesty does not apply to filing periods under audit or identified for an audit.

The most common tax in Texas is the franchise tax. The franchise tax is imposed on most business entities that are organized in Texas or doing business in Texas. Depending upon the amount of business being done in Texas, this can be a very significant tax. Keep in mind this is not an income tax. Instead, it is a tax based on a taxable entity’s margin and is computed in one of the following ways:

  • Total revenue times 70%
  • Total revenue minus cost of goods sold
  • Total revenue minus compensation
  • Total revenue minus $1 million

So, it does not matter if a business entity is in a loss position. There would still be Texas franchise tax exposure. It is important to take advantage of this amnesty program and wipe the slate clean. For more information, visit the Texas Comptroller website.

Kelly Lynch, CPA