How to Clear State LLC Penalty & Request a Waiver (TX + Form 89-224)

Running an LLC offers numerous advantages, but even the most meticulous business owners can encounter state penalties. These penalties, arising from late filings or missed payments, can accumulate and become a financial burden. This blog post specifically addresses navigating the process in Texas. However, the general steps can serve as a valuable guide for LLC owners in other states as well.

How to file Franchise Tax in USA Step by Step Complete Guide

Facing a Texas LLC Penalty? Don’t Panic!

This blog equips you with the knowledge to clear your state penalty and potentially request a waiver using Form 89-224. This form is available for download on the Texas Comptroller’s official website (Comptroller.tx.org). We’ll walk you through the step-by-step process and explore the possibility of receiving a refund.

Who Can Benefit From This Information?

• Ecommerce business owners with LLCs
• Amazon sellers with LLCs
• Anyone facing state-level LLC penalties in Texas
• Business owners in other states dealing with similar penalty situations (general process guidance)

You Can see it Step by Step this video:

Understanding the Penalty:

Several reasons can lead an LLC to incur a state penalty. The most common ones include:

• Late Filing: Failing to file your annual report or franchise tax return on time.
• Late Payment: Missing the deadline to submit your franchise tax payment.
• Non-Filing: Not filing your annual report or franchise tax return at all.

Texas LLC Penalty Structure:

The Texas Comptroller outlines specific penalties for late payments and filings:

• Statutory Penalty on Past Due Taxes:
  • 1-30 days late: 5% penalty
  • Over 30 days late: 10% penalty
  • After the Notice of Tax/Fee Due date: Additional 10% penalty (total of 20%)
• Statutory Interest: Begins accruing on the 61st day after the due date (variable rate).
• Additional Late Filing Penalty: $50.00 per late report, even if no taxes are due.

Steps to Clear Your State LLC Penalty:

1. Identify the Penalty: The first step is to comprehend the specific nature of your penalty. This information is typically included in a notice from the Texas Comptroller’s office, outlining the type of penalty, amount owed, and due date for payment.
2. Pay the Penalty: Even if you intend to request a waiver, it’s recommended to pay the penalty by the due date to avoid further penalties and potential interest accrual.
3. Request a Penalty Waiver: This is where Form 89-224 comes in. This form allows you to formally request a waiver of your penalty. You can download it directly from the Texas Comptroller’s website.

Completing Form 89-224:

The form is straightforward, but ensure you fill out all sections accurately and completely. Here’s a breakdown of the key information you’ll need to provide:

• Contact Information: Your name, address, phone number, and email address.
• Business Information: Your LLC’s name and business registration number.
• Penalty Details: Specify the type of penalty (late filing, late payment) and the associated tax period.
• Reason for Waiver: This is the most crucial section. Clearly and concisely explain why you believe the penalty should be waived. Be honest and specific. Common reasons for requesting a waiver include:
  • Reasonable cause for late filing or payment (serious illness, natural disaster)
  • First-time offense
  • No history of late filings or payments

Submitting Your Waiver Request:

Once you’ve completed Form 89-224, you can submit it electronically (through Email) or by mail to the Texas Comptroller’s office.

What Happens Next?

The Texas Comptroller’s office will review your waiver request and make a decision. They may request additional information during this process. Respond promptly to any inquiries to avoid delays. The timeframe for receiving a decision can vary, so be patient.

Potential for Refund:

If your waiver request is granted, the penalty will be removed from your account. In some cases, if you’ve already paid the penalty, you may be eligible for a refund.

General Process for Other States:

While this blog post focuses on Texas, the general steps involved in clearing a state LLC penalty and requesting a waiver can be similar in other states. Here’s a simplified approach that might be applicable in your state:

1. Identify the Penalty Reason: Understand why you received the penalty.

Review State Guidelines: Each state has its own regulations regarding LLC penalties and waivers. Locate the official website of your state’s tax authority and search for information on LLC penalties and the State Department.