Reinstating a Voided Texas Corporation: Tax Clearance Steps

Reinstating a Voided Texas Corporation

Texas corporations that have been voided for failing to meet state requirements, such as filing franchise tax reports or maintaining a registered agent, face significant hurdles to reinstatement, including tax clearance obligations.

Inexperienced advisors may overlook critical steps, leading to delays, penalties, or permanent dissolution. Are you prepared to reinstate your voided Texas corporation while ensuring tax compliance in 2025? At Kewal Krishan & Co, our expert tax advisors help Texas clients save an average of $50,000 annually, potentially totaling $775,000 over a decade through strategic compliance and tax planning.

This blog outlines the process for reinstating a voided Texas corporation under Texas Business Organizations Code (TBOC) and Texas Tax Code § 171, with federal considerations under Internal Revenue Code (IRC), detailed examples, and compliance steps for 2025. With Texas’s no-state-income-tax environment and streamlined reinstatement processes, timely action can restore your business—act now with insights from Our Tax Planning Services.

Understanding Reinstatement of a Voided Texas Corporation

A Texas corporation becomes voided (forfeited) if it fails to file franchise tax reports, pay taxes, or maintain a registered agent (TBOC § 11.251, Texas Tax Code § 171.251). Reinstatement requires addressing the cause of forfeiture and obtaining tax clearance from the Texas Comptroller.

Key Reinstatement Requirements

• Cause of Forfeiture: Common reasons include non-filed franchise tax reports (Form 05-163/05-169), unpaid taxes, or no registered agent (TBOC § 5.104).
• Tax Clearance: File delinquent reports and pay taxes, penalties (5% per month, up to 25%), and interest (Texas Tax Code § 171.258).
• Reinstatement Filing: Submit Application for Reinstatement (Form 801) to Texas Secretary of State within three years of forfeiture (TBOC § 11.253).
• Federal Taxes: Ensure compliance with federal filings (e.g., Form 1120 for C-Corps, IRC § 6012) to avoid IRS penalties (IRC § 6651).
• OBBBA Impact: No direct reinstatement impact, but enhanced credits (e.g., R&D, IRC § 41) may offset federal liabilities during reinstatement.

File franchise tax reports on Form 05-163/05-169; federal returns on Form 1120 or Form 1040. For details, see Texas Comptroller’s Forfeiture Guide and IRS Publication 15.

Detailed Example: Reinstating a Voided Corporation

Consider a Texas C-Corp voided in 2024 for failing to file 2023 franchise tax report, owing $10,000 tax, with $2 million revenue in 2025.

• Identify Forfeiture Cause: Non-filed Form 05-169 for 2023 (Texas Tax Code § 171.251).
• Tax Clearance: File 2023 report: $2 million revenue, margin $1.4 million (70%), tax $10,500 (0.75%). Pay $10,000 original + $2,500 penalty (25%) + $500 interest (5%) = $13,000. Obtain clearance certificate (Texas Tax Code § 171.258).
• Reinstatement Filing: Submit Form 801 to Texas Secretary of State, $75 fee, within three years (TBOC § 11.253).
• Federal Compliance: File delinquent Form 1120 for 2023, $400,000 income at 21% = $84,000 tax + $4,000 penalty (IRC § 6651). R&D credit $20,000 (IRC § 41) reduces to $64,000.
• Total Cost: Texas $13,000 + $75 + federal $64,000 = $77,075. Timely filing avoids additional $2,625 Texas penalty if delayed further.

Alternative Scenario

For a smaller corp with $500,000 revenue: 2023 tax $2,625, penalty $656, interest $131 = $3,412. Federal tax $21,000 + $1,050 penalty = $22,050. Total $25,537, lower with prompt action.

Step-by-Step Guide for Taxpayer Compliance

To reinstate a voided Texas corporation in 2025, follow these steps:

1. Identify Forfeiture Cause: Review Comptroller/SoS notices for tax or agent issues (TBOC § 11.251).
2. File Delinquent Reports: Submit overdue Forms 05-163/05-169 for franchise tax (Texas Tax Code § 171.251).
3. Pay Taxes and Penalties: Clear tax, 5% monthly penalty (up to 25%), and interest via TEXNET (Texas Tax Code § 171.258).
4. Obtain Tax Clearance: Request certificate from Comptroller post-payment (Texas Tax Code § 171.258).
5. Submit Reinstatement: File Form 801 with Texas Secretary of State, $75 fee (TBOC § 11.253).
6. Address Federal Taxes: File delinquent Form 1120/1040, pay penalties (IRC § 6651); claim credits (IRC § 41).
7. Reinstate Agent: Update registered agent if needed (TBOC § 5.104).
8. Retain Records: Keep clearance, filings, and payments for four years (Texas Tax Code § 171.211, IRC § 6001).

For reinstatement support, explore Our Business Tax Services.

Common Pitfalls to Avoid

• Delayed Filing: Missing three-year reinstatement window risks permanent dissolution (TBOC § 11.253).
• Incomplete Payments: Unpaid penalties/interest delay clearance (Texas Tax Code § 171.258).
• Federal Non-Compliance: Delinquent IRS filings trigger additional penalties (IRC § 6651).
• Credit Oversight: Not claiming R&D credits loses federal offsets (IRC § 41).

Why Work with a Tax Expert?

Reinstating a voided Texas corporation requires coordinating TBOC, Texas Tax Code § 171, and IRC, where errors can delay reinstatement or incur penalties. Generic advisors may miss clearance steps or federal credits, costing thousands. Kewal Krishan & Co specializes in Texas reinstatement strategies, ensuring timely compliance and savings. Our expertise mitigates risks, as shown in Our Tax Litigation Services.

Conclusion

Reinstating a voided Texas corporation in 2025 demands addressing franchise tax delinquencies under Texas Tax Code § 171 and federal compliance under IRC to secure tax clearance. With Texas’s no-income-tax advantage and OBBBA-enhanced credits, timely reinstatement restores operations efficiently—act now to clear taxes and reinstate your corporation.

Call to Action

Schedule a consultation with Anshul Goyal, CPA EA FCA, a licensed U.S. CPA and Enrolled Agent, admitted to practice before the IRS, specializing in tax litigation and cross-border tax for U.S. businesses and Indians in the U.S. Contact us at Kewal Krishan & Co to reinstate your corporation.

About Our CPA

Anshul Goyal, CPA EA FCA, is a licensed U.S. CPA and Enrolled Agent, representing clients in IRS tax litigation and assisting with cross-border tax compliance for U.S. businesses and Indians in the U.S. His expertise ensures tailored strategies that maximize savings and ensure compliance.

Disclaimer

This blog provides general information for educational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently, and individual circumstances vary. Consult a qualified tax professional before making decisions. The author and firm disclaim liability for actions taken based on this content.

FAQs

1. Why is a Texas corporation voided?

Non-filed franchise reports, unpaid taxes, or no agent (TBOC § 11.251).

2. What’s required for reinstatement?

File delinquent reports, pay taxes/penalties, submit Form 801 (Texas Tax Code § 171.258).

3. What’s the franchise tax penalty?

5% monthly, up to 25% (Texas Tax Code § 171.258).

4. How long to reinstate?

Within three years of forfeiture (TBOC § 11.253).

5. What federal filings are needed?

Form 1120 for C-Corps, with penalties if delinquent (IRC § 6651).