I will preface this post with saying that at the time, no, I was not ready to start a company, nor did I know what I was getting myself into. However, I would appreciate any advice that can be given to help me in this situation:

In December 2013, I started an LLC in Texas. As one could probably assume, life and work got the best of me and the company did not takeoff as planned (ZERO income company). From 2013-2018, I moved no less than 5 times throughout the United States. Therefore, I did not get any notifications from the Texas Comptroller's Tax Department. Cue a recent and final move, where I realize it would be wise to close up all loose ends. I fill out and complete all annual franchise tax reports, operation information reports, and send it in to the Texas Comptroller's office with any late fee that are due for the late completion of the annual franchise tax report.

I receive notice that the company cannot be terminated (or reinstated to be terminated) because I owe $1400 in taxes based on an ASSUMPTION that my company would have made money per the industry standard. Mind you, my company never made a single cent. Therefore, I have nothing to be taxed. Has anyone dealt with this issue or have advice? I am at my wits end. I have no problem paying what is owed, but I refuse to pay taxes on something that isn't taxable.

Supply them your financial records showing that you would not owe any taxes. Did you file the 05-163 with the Comptroller for each year?

I gathered up and submitted those forms (05-163) for all of the years. $0, $0, $0, $0

They even respond on the phone "Yeah, we know its not right to make you pay money on taxes you don't owe...but, i don't have the authority to remove that fine" :/ So i don't know if I am calling the wrong person or if there is a better way to go about this...

Yeah, they filed a return, or returns, for you based on some estimate. I have seen that done a half-dozen times, but it has been awhile ago. I think that once the returns were filed, such as you have, they waived the "calculated tax." Back then, there was no $50 late filing penalty for franchise taxes. I doubt that would go away but it would seem you possibly could get the calculated tax to go away.

Since you have never operated the company (as best I can tell), perhaps someone on here can advise you as to any downside in just leaving things as is, i.e., not paying what has been assessed. If you were operating the LLC, different deal, you would want to get the problem resolved but what can be done if you just say to heck with it.

Won't you just have inactive status in TX? If you're not operating the company, I don't think there is much that will be done beyond placing you in inactive status....but not real sure.

I would totally love to just leave the company in forfeiture, but it's tied to legal zoom. Legal zoom charges yearly to be a registered agent and refuses to close the account until I have a "Certification of Termination" from Texas

Call back and ask to speak with THE COMPTROLLER, Glenn Hagar. He will solve your problem.
Remember that our politicians are there to serve the taxpayers. They are paid very well and have great benefits to do just that. Please post the result here. I think you will be pleased with the response.

sms400 said:

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I would totally love to just leave the company in forfeiture, but it's tied to legal zoom. Legal zoom charges yearly to be a registered agent and refuses to close the account until I have a "Certification of Termination" from Texas

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Wow, I have never used Legal Zoom but that is a crock. What The Wonderer said, change the registered agent, think you can do so for $15 or so. Don't know if there might be an issue though with changing the registered agent when your franchise status has been involuntarily ended. Never tried to do that before. Of course, no telling what Legal Zoom put in their contract with you as far as fees to them and changing the registered agent. Sorry to hear they do that.

30wedge said:

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I think that once the returns were filed, such as you have, they waived the "calculated tax." Back then, there was no $50 late filing penalty for franchise taxes. I doubt that would go away but it would seem you possibly could get the calculated tax to go away.

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This is the correct answer. Texas will default assess $1,000 of tax due, plus penalties and interest, if they do not receive a return. However, once you file the actual return, that amount should be wiped clear, and you should only owe the $50 late filing penalty.

It's possible they haven't received/processed your $0 tax due returns yet , and perhaps why they haven't abated the "estimates" amount due. I've never had them not remove that amount once a return is filed.

Just to add to the above, there is a very simple no tax due form you can fill out and file in a couple of minutes.

As an aside, you may not have all of the legal protections of an LLC if you are not in compliance with state tax requirements. A rude suprise in a legal situation that may expose your personal assets.

DeLaHonta said:

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30wedge said:

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I think that once the returns were filed, such as you have, they waived the "calculated tax." Back then, there was no $50 late filing penalty for franchise taxes. I doubt that would go away but it would seem you possibly could get the calculated tax to go away.

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This is the correct answer. Texas will default assess $1,000 of tax due, plus penalties and interest, if they do not receive a return. However, once you file the actual return, that amount should be wiped clear, and you should only owe the $50 late filing penalty.

It's possible they haven't received/processed your $0 tax due returns yet , and perhaps why they haven't abated the "estimates" amount due. I've never had them not remove that amount once a return is filed.

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As a CPA that has clients set up companies that they don't tell us about until they receive this $1000 tax due notice, this has been my experience. File the returns, pay the $50/year late penalties, get the cert of good standing and dissolve it and be done.

2wealfth Man said:

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Just to add to the above, there is a very simple no tax due form you can fill out and file in a couple of minutes.

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If he has the webfile XT number he can do everything online.

sms400 said:

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I gathered up and submitted those forms (05-163) for all of the years. $0, $0, $0, $0

They even respond on the phone "Yeah, we know its not right to make you pay money on taxes you don't owe...but, i don't have the authority to remove that fine" :/ So i don't know if I am calling the wrong person or if there is a better way to go about this...

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you are not calling the right person. Call again, and if they say that again, ask to speak to a person that CAN remove those fines.

Update for everyone- now I got an email notification that although they have received EVERYTHING (even my no tax due forms), I still owe $1400 on estimated taxes because it's past the 4 years of statute of limitations. :/

Plan to try a few of the other options others listed above.

sms400 said:

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Update for everyone- now I got an email notification that although they have received EVERYTHING (even my no tax due forms), I still owe $1400 on estimated taxes because it's past the 4 years of statute of limitations. :/

Plan to try a few of the other options others listed above.

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What year are they claiming you owe taxes for?

2014

Which was a zero year

sms400 said:

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2014

Which was a zero year

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You sure they aren't retro-taxing your text messages?

Ha they might be. I don't know what they're doing...

Going to keep calling until I can hopefully get this resolved. I honestly am at a loss...I have called 3 different people and all say I have to pay the $1400

There should be a process for reconsideration on their end. Thats not right. I would keep fighting it.

Agreed. Paying $1400 on literally nothing is like me quite literally flushing it down the toilet...

Questioning if I should get a lawyer involved at this point. Have a few more options to try

I don't think getting a lawyer is going to do you any good and the likely result would be you owe the $1,400 plus whatever he or she charges you.

At this point I would attempt to change the registered agent. There is the form for this on the SOS website. As I recall, there is a $15 fee for changing the registered agent. I do not know if this will fly with the SOS since the entity's status has been involuntarily ended for franchise tax purposes, but I think it will go through.

Notify Legal Zoom you have changed the registered agent and no longer need their services. (Not sure what your agreement with them says as I have always used attorneys and not Legal Zoom.)

Send a certified letter to the Comptroller, with copies of the no tax due franchise reports, and explaining the reasons they were not filed and state that you have never operated the entity. You will owe a $50 (per year) penalty for filing the reports late. I would tell them that you realize you will owe that $50 per year penalty and if they will invoice you for that you will promptly pay it.

If they insist on the $1,400, I would not pay it and just let it sit. No telling how many thousands of taxable entities are in this status.

What a BS set of rules. Sorry to hear that even in Texas honest people get screwed.

Part of me wants to call and ask "when did Texas become like California"

30wedge,

I have done everything you have stated right to the end (including mailing back ALL missing documentation and late fees). I am at the last point/option now, which is leaving the company just sitting there with $1,400 due for the rest of eternity lol. My only concern is this will come up from the grave 20 years from now and bite me in the...you know what.

Take all of your documentation and make a trip either to the local Taxpayer Services and Collections field offices, or to the main office in Austin.

Talk to someone that has decision making authority face-to-face.

If you only owe the $50 late filing fee...pay it...then be done with the situation.

There is nothing outstanding (no late fees, no paperwork...nothing), with the exception of the $1,400 "assumed tax"

I like the idea of handling this face-to-face. Just need to determine if a $1000 flight back to Texas is worth it/will actually fix the issue. But- might be the best answer to all my problems! Thanks for the suggestion, I sincerely appreciate it.

Sounds like you should just pay the "stupid tax" and move forward taking this as a learning experience. It sounds like it'll cost more to fix than the tax itself.

Oh...man...I didn't realize you were out of state.

That definitely complicates the face-to-face suggestion.

The Wonderer said:

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Sounds like you should just pay the "stupid tax" and move forward taking this as a learning experience. It sounds like it'll cost more to fix than the tax itself.

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No - he should not owe this.

Call and ask if there is a "reconsideration" process. If that doesnt work, talk to someone with decision making authority. Say you will pay the $50 fee.

The assumed tax is an attention getter to make you comply in lieu of a return.

They took away a lot of the authority from the people you talk to on the main phone number. Used to be we would call them and have them fix client accounts in the system with just a phone conversation. Sometimes i would have to email the person I talked to. Got a few direct lines and email addresses, which made it super easy to handle stuff for clients, but someone in Austin changed all that a number of years ago. Now you need a supervisor type.

Do as everyone else said - let them process the returns and then deal with the new amount due. Tell Legal Zoom go pound sand. They can't force you to use them as registered agent. You can make that one of the officers listed on the public info report by filing a new PIR (might be another registered agent change process).

sms400 said:

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30wedge,

I have done everything you have stated right to the end (including mailing back ALL missing documentation and late fees). I am at the last point/option now, which is leaving the company just sitting there with $1,400 due for the rest of eternity lol. My only concern is this will come up from the grave 20 years from now and bite me in the...you know what.

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I am not a lawyer, but as far as I know, that $1,400 cannot come up and bite you. I have had people not file their franchise tax reports and they have sat with their franchise tax status as involuntarily ended for around two decades. .

From time to time, the Comptroller will offer an amnesty program for a set time period but, as I recall, that wouldn't help you since they have assessed an estimated tax. I think had that not been assessed (and I have some who have never had an estimated tax assessed) then you could avail yourself of the amnesty provisions.

Like another poster, I did not realize you were out of state. And, also like another poster, I do not think you are going to get anyone to change things with a face to face meeting since I agree that they have likely had some of their ability to be flexible taken away from them. I do not think the $1,000 flight is a very good gamble with regard to getting the $1,400 issue resolved. I would try one more call, tell them that you have submitted reports, and late fees, and that you would like to speak to a supervisor or manager about any possibility of getting this estimated tax to go away, since you clearly do not owe a dime of tax. Call on a Friday, preferably before a long weekend (today would have been a great day for that!). State what you are wanting to do, use the pregnant pause, multiple times if need be, If no luck, try again and do the same routine with the next person.

If that doesn't work, and if you are concerned about the $1,400, rather than a flight, a better option might be to ask an attorney familiar with Texas franchise tax as to whether the $1,400 can ever be an issue for you. As far as I know, the only downside of not being current on your franchise tax, and being terminated, is in the area of filing a lawsuit or if your entity is being sued. As I recall, you have never operated the business so those two concerns go away.

Wish I had a better answer for you.

Zero income? Or zero revenue?

Those are completely different topics in taxation

jefe95 said:

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Zero income? Or zero revenue?

Those are completely different topics in taxation

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Texas has a margin tax that is based on gross revenue with very few specifically identified deductions allowed.

This company was NEVER operated, so ZERO income and ZERO revenue