UPDATE 8/9/2023 – I have updated the dates in this post to apply to the 2023 Tax Year which covers tax years that ended during or on 12/31/2022.
- Applies to businesses that paid more than $10,000 in franchise tax payments during the preceding state fiscal year
- Payments must be made electronically
- You must have 100% of the tax paid
- Deadline is August 15th, 2023
If your goal was to create a complicated state tax, you’d probably want to take a look at how Texas has crafted the Texas Franchise Tax as a role model of complexity.
What is the second Texas Franchise Tax Extension?
Business that paid $10,000 or more in franchise tax payments during the preceding state fiscal year (September 1 through August 31) are required to make their payments electronically. If your business falls into this category, your first deadline is the normal May 15 deadline. However, if you file an extension on May 15 for one of these businesses, the deadline is only extended for 3 months, until August 15. On August 15, you either have to file your franchise tax return or request a second 3 month extension, which gives you until November 15. Currently, the August 15, 2023 deadline applies to the reports for business who have a tax year that ended during 2022. For a full discussion on the tax years and report years, see my post “Answers to Common Questions About the Texas Franchise Tax Report.”
Do you need to make a payment with the second extension?
Like all tax questions, the answer to the question of whether to make a payment depends on your situation. As a reminder, for the first extension due on May 15, you’re required to pay in either 100% of your prior year tax or 90% of your current year tax liability. Regardless of the amount you paid on the first extension, you need to make up any difference between what you paid on May 15 with the remaining amount you’ll owe on the current year’s franchise tax report. So, if you paid in 90% of the current year tax liability, you’ll need to pay the remaining 10% of the tax liability with this second extension.
I know this is strange because if you haven’t file the report yet, you probably don’t know what your tax will be. This is especially true for combined entity groups. All I can suggest is give it your best guess.
Do I have to pay electronically?
Yes! If you fall into this category of taxpayer, you are required to make your payments electronically, regardless of the amount of the payment. So, even if this payment is less than $10,000, it still must be made electronically. Let’s face it, with today’s technology and the state’s simple electronic payment systems, you should be paying all your franchise tax payments electronically regardless of the amount.
How do I make an electronic payment for my Texas Franchise Tax?
The state gives you a few methods for electronic payments. Here are the two most common methods:
TEXNET
The traditional electronic payment method is called TEXNET. All businesses are able to create a TEXNET account and make payments through this system. However, if your total franchise tax payments for the prior year are $500,000.00 or more, then you are REQUIRED to use the TEXNET system to pay your franchise tax. The one thing to remember for this system is that you have to initiate the payment by 8 p.m. (CT) one business day before the date of the payment.
Webfile
The Texas webfile service is available to all taxpayers who paid less than $500,000 in the prior year. If you are required to pay electronically and you don’t use TEXNET, then you should use the webfile service to make your franchise tax payment. This applies to businesses that paid $10,000 to $499,999.99 and are not using the TEXNET system.
To make an electronic payment and file the second extension, the state has a website with multiple filing and electronic payment options. Get more information on these options at the Comptroller’s “File & Pay” website.
If you still have questions about your second franchise tax extension ask your tax professional or send me a message at my Contact Me page.
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