Austin Tax Preparation 2026: Federal Filing in a No-Income-Tax State (and the Texas Forms People Forget)
The federal forms an Austin resident actually needs
Start with Form 1040, the individual federal income tax return, due April 15, 2026 for the 2025 tax year. From there, the supporting schedules attach based on what’s in your financial life. Schedule A for itemized deductions (mortgage interest, state and local taxes capped at $40,400 under OBBBA, charitable contributions, medical expenses over 7.5% of AGI). Schedule B for interest and dividend income over $1,500. Schedule C for self-employment income. Schedule D for capital gains and losses. Schedule E for rental real estate or pass-through K-1 income. Schedule SE for self-employment tax at 15.3% on net earnings.
Most Austin residents don’t itemize anymore because the standard deduction is high — $16,100 single and $32,200 married filing jointly for 2026, with inflation adjustments for 2025. Travis County homeowners with significant mortgage interest and property tax often do itemize. The math is straightforward: if mortgage interest plus property tax (capped at $40K total SALT under OBBBA) plus charitable contributions exceeds the standard deduction, itemize. Otherwise take the standard deduction and don’t waste time on Schedule A.
Austin-specific forms most people forget: Form 8606 if you did a backdoor Roth IRA conversion, Form 8889 if you contributed to an HSA, Form 8949 for crypto transactions (Austin has a heavy tech and crypto presence), Form 4562 for depreciation if you bought rental real estate, and Form 1116 for foreign tax credit if you held any foreign investments through Fidelity or Schwab. Each of these is small individually but missing any of them either costs you a deduction or triggers an IRS notice later. Solid Austin tax preparation catches all of them.
Texas filings that surprise new Austin residents
If you own an LLC, S-corp, C-corp, limited partnership, or professional association registered in Texas, you have to file a Texas franchise tax report every year. This is true even if your entity made zero dollars. It’s true if you’re a single-member LLC that’s disregarded for federal tax purposes. The franchise tax report is governed by Chapter 171 of the Texas Tax Code, administered by the Texas Comptroller of Public Accounts, and due May 15, 2026 for the 2025 reporting year. An automatic extension to November 15 is available by filing Form 05-164.
The 2026 no-tax-due threshold is $2.65 million in annualized total revenue. Below it, you file the Public Information Report (Form 05-102) and a No Tax Due Report. Above the threshold, you compute tax using either Form 05-169 (EZ Computation) at 0.331% of total revenue, or Form 05-158 (Long Form) with rates of 0.375% for retail and wholesale and 0.75% for everyone else, applied to the lower of four taxable margin methods. Skipping the filing — even with zero revenue — eventually triggers forfeiture of your right to do business in Texas under Section 171.252.
Sales and use tax is the other one people miss. Texas state sales tax is 6.25% with local jurisdictions adding up to 2%. Austin’s combined rate is 8.25% within city limits. If you sell taxable goods or services, you need a sales tax permit from the Texas Comptroller and you file monthly, quarterly, or annually depending on tax liability. Online sellers (Etsy shops, Shopify stores, digital products) need to check Texas’s economic nexus rules under Section 151.107, and they need to track sales into other states for those states’ nexus thresholds. Austin tax preparation that ignores sales tax is incomplete.
Travis County property tax and the SALT cap math
Travis County has one of the highest effective property tax rates in the country — typically 1.8% to 2.2% of assessed value, depending on the school district and city. On a $750,000 Austin home, that’s $13,500 to $16,500 a year in property tax alone. Combine that with any other state and local taxes (vehicle registration, certain franchise tax liabilities, business property taxes), and you can hit the $40,400 SALT cap fast even without a state income tax in the picture.
The cap matters because for itemizers, anything over $40,400 in state and local taxes is non-deductible federally. OBBBA raised the cap from $10,000 to $40,400 for 2026, then it reverts to $10,000 in 2030 unless Congress extends it again. For Austin homeowners who paid attention to the math under the old $10,000 cap, the $40,400 cap is a meaningful improvement but still bites for high-end Westlake or Tarrytown homes with $30,000+ property tax bills.
There’s a partial workaround for business property tax. If you own commercial real estate in Travis County through an LLC, the property tax is a business expense deducted on Schedule E or the entity’s tax return — not subject to the SALT cap. Same for property tax on equipment used in a Schedule C business. The cap applies specifically to state and local taxes deducted on the personal Schedule A. Sophisticated Austin tax preparation often involves making sure the right expenses are flowing to the right schedules to avoid the cap when legally available. Hint: don’t try to recharacterize personal-use property tax as business — the IRS catches this, and it triggers exactly the kind of audit nobody wants.
Remote workers, multi-state nexus, and the California problem
Plenty of Austin residents work remotely for companies headquartered elsewhere, or invoice contracts to clients in other states. The general rule is that you pay state income tax based on where you live, not where your employer is located — with significant exceptions. New York, Pennsylvania, Nebraska, Delaware, Connecticut, and Arkansas apply the “convenience of the employer” rule, which can require nonresident state tax filings even when the work was done from Austin. New York is the most aggressive on this. If you work remotely from Austin for a New York-based employer who has a New York office you could theoretically work from, New York may want to tax you anyway under 20 NYCRR 132.18(a).
California is a separate problem. California doesn’t use the convenience rule but it does pursue nonresidents aggressively when there’s any California-source income. If you’re an Austin freelancer invoicing California clients, the California Franchise Tax Board may claim that the income is California-sourced under R&TC Section 17951, depending on what services you performed and where the customer used them. Software development, consulting, and creative services are particularly exposed. Most Austin freelancers can defend their no-California-filing position, but it requires good documentation about where the work was performed and what the contract terms looked like.
Real-world Austin scenario: a software developer who moved from San Francisco to Austin in 2024 kept his W-2 job at the same California company. His employer was not running California withholding because they updated his residency. He filed only the federal Form 1040 and assumed he was done. California’s Franchise Tax Board sent a Notice of Proposed Assessment two years later, claiming residency-based tax on the move year and source-based tax on the post-move income because his employer hadn’t reported the residency change properly to California. Resolution took 14 months and required a part-year California return, supporting documentation, and a written rebuttal of California’s source income argument. Austin tax preparation that ignores nexus issues creates exactly this problem.
Federal versus Texas deadlines for Austin businesses
Federal tax deadlines for businesses are stacked through the spring. S-corporations and partnerships file Form 1120-S or Form 1065 by March 15, 2026 for the 2025 tax year, with a six-month automatic extension available via Form 7004. C-corporations file Form 1120 by April 15, 2026 (for calendar-year corps), with the same extension option. Sole proprietors and single-member LLCs file Schedule C as part of the personal Form 1040 by April 15.
Texas franchise tax sits on a different calendar. May 15, 2026 is the original due date for the 2025 reporting year. The automatic six-month extension to November 15 requires Form 05-164 filed by May 15. The Public Information Report has the same due date and the same extension treatment. Texas sales tax filings depend on liability — monthly filers have a 20th-of-the-month deadline, quarterly filers file 20 days after quarter-end, and annual filers file January 20 for the prior calendar year.
Estimated tax payments are the deadline most Austin business owners blow. Quarterly federal estimated payments are due April 15, June 15, September 15, and January 15 (for the next year). The safe harbor under IRC §6654 is paying either 100% of last year’s tax (110% if AGI was over $150,000) or 90% of current year tax. Underpay and you owe penalty plus interest, calculated quarter by quarter. The penalty isn’t huge in dollar terms for small underpayments but it’s avoidable, and good Austin tax preparation includes mid-year and Q3 reviews specifically to recalculate estimates against actual income trajectory.
Crypto, RSUs, and tech-comp issues common in Austin
Austin has one of the highest concentrations of tech workers and crypto investors per capita in the country. The tax issues that come with that are real. Restricted stock units (RSUs) are taxed as ordinary income on the date they vest, at the fair market value on vest date — reported on the W-2 in box 1 and box 14. The cost basis for future sale is the vest-date value, not the grant-date value. A lot of Austin tech workers double-count by reporting the full proceeds as gain on Schedule D without adjusting basis, which inflates capital gain and overpays tax. Form 8949 with the correct cost basis adjustment fixes this.
Incentive stock options (ISOs) are messier. Exercising ISOs doesn’t create regular taxable income but does create alternative minimum tax (AMT) preference under IRC §56(b)(3). The spread between exercise price and fair market value at exercise becomes an AMT preference item. A surprisingly large number of Austin tech employees exercise ISOs in a year their stock then crashes and end up owing AMT on phantom income they never realized. Form 6251 calculates AMT and Form 3921 is the issuer’s reporting form for ISO exercises. Austin tax preparation for tech workers should always include an AMT projection before any ISO exercise.
Crypto reporting is now mandatory under IRC §6045(g) and the 2026 Form 1099-DA expansion that requires brokers to report digital asset transactions. Every crypto-to-fiat sale, every crypto-to-crypto trade, and every use of crypto to purchase goods is a taxable event. Cost basis tracking is the hardest part because most exchanges don’t preserve historical cost basis cleanly. Tools like CoinTracker, Koinly, and TaxBit produce Form 8949-ready reports for most use cases. NFT transactions follow the same rules as other crypto. Wallet-to-wallet transfers within the same beneficial owner are not taxable but should be documented in case of audit.
Real estate flips and the Austin investor problem
Austin’s real estate market has produced a lot of fix-and-flip investors over the past decade. The tax treatment depends on a key distinction: are you a dealer or an investor? A dealer holds property primarily for sale to customers in the ordinary course of business — the gain is ordinary income and the property is inventory, not a capital asset. An investor holds property for appreciation — the gain is capital gain, eligible for long-term rates (0%, 15%, or 20% based on income) if held over a year.
The IRS uses the “Winthrop factors” from court cases like Suburban Realty v. United States to determine dealer versus investor status: number and frequency of sales, holding period, sales effort, business activity related to the property, and the taxpayer’s primary purpose. Doing two or three flips a year while holding a day job probably keeps you in investor territory. Doing eight to ten flips a year, running ads, hiring a sales team, and treating it as a business pushes you firmly into dealer territory — with ordinary income tax (up to 37%) and self-employment tax (15.3%) replacing the capital gains rates.
Section 1031 exchanges still apply to investment real estate (not dealer property) and let an Austin investor defer gain by reinvesting proceeds into like-kind property within 180 days, with intermediary requirements. Section 121 gives Austin homeowners a $250,000 single / $500,000 married exclusion on the sale of a primary residence held two of the last five years. Combining these with proper planning — primary residence to investment property to 1031 exchange to step-up at death — is the kind of multi-year strategy that pays for Austin tax preparation done by someone who actually plans, not just files.
How The Reed Corporation handles Austin tax preparation
We’re a New York City CPA firm with a Texas focus, working with Austin individuals, small businesses, and high-income professionals. Our Austin engagements typically include the federal Form 1040 with all supporting schedules, the Texas franchise tax report and Public Information Report (for entity owners), multi-state filings where required, quarterly estimated tax calculations, and year-end planning meetings. The point is to fold tax preparation into a year-round relationship rather than a February-only transaction.
Pricing is flat-fee, scoped in writing before the year starts. For a typical Austin individual return with an itemized Schedule A, one Schedule C or K-1, and Texas franchise tax for one entity, expect $1,400 to $2,400. More complex returns — multiple entities, real estate, multi-state, RSU and ISO planning, crypto with significant transaction volume — run higher and are quoted individually. Bookkeeping, payroll, and ongoing advisory are separate engagements with separate scopes.
If you’ve moved to Austin recently from a higher-tax state, the move-year return is the one to get right. Partial-year California or New York filings, residency documentation, and the federal treatment of the move itself all need to be coordinated, and mistakes in the move year tend to trigger nexus questions for years afterward. We’ve handled enough of these to know the playbook. The 30-minute intake call is free and will tell you whether your situation is straightforward enough to handle yourself or genuinely needs professional help. We send plenty of prospects back to TurboTax with a checklist when that’s the right answer.
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Frequently Asked Questions
What forms does an Austin resident need for federal tax preparation in 2026?
Start with Form 1040, the U.S. Individual Income Tax Return, which every Austin resident with filing-threshold income files annually by April 15. For the 2025 tax year, that means April 15, 2026. The supporting schedules depend on your income mix. Schedule 1 captures additional income (rental, gambling, alimony) and adjustments to income (HSA deduction, student loan interest, self-employed health insurance). Schedule 2 reports additional taxes including AMT and self-employment tax. Schedule 3 reports additional credits and payments. These three numbered schedules are the spine of the modern Form 1040 and missing one is a common Austin tax preparation mistake.
Lettered schedules attach based on activity. Schedule A for itemized deductions covers state and local taxes (capped at $40,400 under OBBBA for 2026), home mortgage interest, charitable contributions, and medical expenses above 7.5% of AGI. Schedule B is required if you have over $1,500 in interest or dividends, or any foreign accounts. Schedule C reports profit or loss from a sole proprietorship or single-member LLC. Schedule D reports capital gains and losses, paired with Form 8949 for individual transaction detail. Schedule E covers rental real estate, royalties, partnerships, and S-corporations.
Self-employment income brings additional forms. Schedule SE calculates self-employment tax at 15.3% (12.4% Social Security up to the wage base of $168,600 for 2024, $176,100 for 2025, plus 2.9% Medicare with no cap). Half of self-employment tax is deductible as an adjustment to income. Form 8829 calculates the home office deduction using the actual expense method. The simplified method (a $5 per square foot deduction up to 300 square feet, capped at $1,500) doesn’t need Form 8829 but limits the deduction. Form 4562 reports depreciation, including Section 179 expensing and bonus depreciation under IRC §168(k).
Investment-related forms add up. Form 8606 tracks nondeductible IRA contributions, including backdoor Roth conversions which are common among higher-income Austin tech workers. Form 8889 handles HSA contributions and distributions. Form 8949 reports individual security and crypto transactions. Form 1099 forms (1099-INT, 1099-DIV, 1099-B, 1099-NEC, 1099-MISC, 1099-K) are inputs you receive from financial institutions and platforms, not forms you file — but every one of them needs to be reconciled against what’s reported on the return.
Real-world Austin example: a single tech worker with $180,000 W-2 income, $25,000 in vested RSUs (already in W-2 box 1), $8,000 in stock dividends, a $40,000 capital gain from selling RSU shares, $35,000 in mortgage interest, and $14,000 in Travis County property tax. Forms needed: Form 1040, Schedule A (itemized, with SALT capped at $40K), Schedule B (dividends over $1,500), Schedule D and Form 8949 (capital gain with cost basis adjustment for vested RSU value), Form 8606 if any backdoor Roth conversions were made. Total federal tax preparation time runs 4-8 hours with a CPA. Austin tax preparation done right means catching the cost basis adjustment on Form 8949 — missing it is a $9,500 overpayment of capital gains tax in this scenario.
Business owners need entity forms. S-corporations file Form 1120-S by March 15, generating K-1s for shareholders that flow to the personal Form 1040 via Schedule E. Partnerships file Form 1065 by March 15, generating K-1s for partners. C-corporations file Form 1120 by April 15. Each of these has its own complexity layer. K-1 reporting on the personal return is where Austin tax preparation goes wrong most often because the K-1 has 15+ box items and not all of them are obvious where to report.
International forms catch a lot of Austin residents who don’t realize they’re triggered. Form 8938 (FATCA) is required if you have foreign financial assets above thresholds ($50K single / $100K MFJ at year-end, higher mid-year). FBAR (FinCEN Form 114) is required if you had foreign financial accounts with aggregate balance over $10,000 at any point in the year. Form 5471 is required for U.S. owners of foreign corporations. Penalties for missing these are severe — $10,000+ per form per year. Austin tax preparation that ignores foreign account reporting creates massive future liability.
Documentation needed to prepare these forms: prior year return, all W-2s and 1099s, year-end brokerage statements (Form 1099-Composite from major brokers covers most), mortgage interest statements (Form 1098), property tax bills (Travis Central Appraisal District provides records at traviscad.org), charitable contribution receipts, K-1s from any pass-through entities, and HSA/IRA contribution records. Missing documentation is the #1 cause of return delays and amended returns. Good Austin tax preparation includes a checklist sent out in January that lays out everything needed.
Where The Reed Corporation adds value: we run a pre-engagement document checklist tailored to your situation, we file extensions automatically when documentation is delayed (Form 4868 for individuals, Form 7004 for entities), and we don’t file rushed returns in April just to hit a deadline. Filing accurate is more important than filing fast, and the extension period exists for good reason. Austin tax preparation we handle is built around catching what software and franchise shops miss — the cost basis adjustments, the qualified plan contribution limits, the AMT exposure on ISO exercises, the multi-state nexus questions. Those are where real money is.
Does Texas require any state-level filings as part of Austin tax preparation?
Texas doesn’t have a state individual income tax, so most Austin residents don’t file anything with the state for personal income. Article 8 Section 24 of the Texas Constitution prohibits a state income tax. That’s the part everyone knows. What people miss is that Texas has plenty of other tax filings that catch businesses, property owners, and certain types of income earners. Calling Texas a no-tax state is wrong. Calling it a no-state-income-tax state is correct.
The big one is the Texas franchise tax for entity owners. Every LLC, corporation, limited partnership, and professional association registered in Texas has to file a Texas franchise tax report annually with the Texas Comptroller of Public Accounts. The report is due May 15, 2026 for the 2025 reporting year. The no-tax-due threshold is $2.65 million in annualized total revenue — below it you file Form 05-102 (Public Information Report) and Form 05-163 (No Tax Due Report) and owe nothing. Above it you compute tax using Form 05-169 (EZ) or Form 05-158 (Long Form). Skipping the filing eventually triggers entity forfeiture under Section 171.252 of the Texas Tax Code.
Texas sales and use tax applies if you sell taxable goods or services in Texas. The state rate is 6.25% and local jurisdictions add up to 2%, so Austin’s combined rate is 8.25% within city limits. A sales tax permit is required from the Texas Comptroller and filings are monthly, quarterly, or annual depending on tax liability. Marketplace facilitator rules (Section 151.0242) shift collection responsibility to platforms like Amazon and Etsy for most sellers, but direct sellers still need to register. Out-of-state sellers cross the Texas economic nexus threshold at $500,000 in Texas sales under Section 151.107.
Property tax is handled at the county and city level, not state level. Travis County effective property tax rates run 1.8% to 2.2% depending on school district, with the assessment done by the Travis Central Appraisal District (TCAD). The protest deadline is May 15 each year, and Austin homeowners who don’t protest annually are leaving real money on the table. Successful protests typically reduce assessed value by 5-15%, which on a $750,000 Austin home is $675 to $2,475 in annual property tax savings. Austin tax preparation that ignores property tax protest as part of the planning conversation is incomplete.
Real-world example: an Austin LLC owner with $4M in revenue, owned a $1.4M home in Travis County, ran a tech consulting business. Annual Texas state filings: franchise tax report (Form 05-158, long form, tax due of approximately $18,000 at 0.75% on $2.4M margin), Public Information Report (Form 05-102, due same day), sales tax (not applicable for consulting services), property tax bill of $28,000 from Travis County. Federal interaction: franchise tax fully deductible on Schedule C as a business expense (reducing taxable business income), property tax on Schedule A subject to the $40K SALT cap. The state filings looked simple but the federal coordination required care.
Hotel occupancy tax catches Austin short-term rental hosts. Texas state hotel occupancy tax is 6%, and Austin adds its own local hotel occupancy tax. Airbnb and VRBO collect and remit on behalf of hosts for state tax but local taxes are sometimes the host’s responsibility. The Austin short-term rental ordinance (Type 1 licensing for owner-occupied, Type 2 for non-owner-occupied) adds licensing requirements. Filing the hotel occupancy tax report on Form 12-100 with the Texas Comptroller is required for hosts who don’t have platform collection.
Mixed beverage gross receipts tax applies to Austin restaurants and bars serving alcohol with a TABC license. The rate is 6.7% on gross receipts from mixed beverage sales (alcohol consumed on premises), filed monthly on Form 67-100. Mixed beverage sales tax is an additional 8.25% paid by the customer. Both are administered by the Texas Comptroller. Austin restaurant tax preparation has to handle both layers plus sales tax on food and non-alcoholic beverages, which is a lot of moving pieces.
Other state filings to be aware of: Texas Workforce Commission unemployment insurance filings (Form C-3) quarterly for employers, Texas Comptroller IFTA filings for trucking businesses, motor fuel tax for fuel distributors, and various industry-specific taxes (insurance, telecommunications, cement) that catch specialized businesses. Most Austin small businesses won’t touch most of these. Austin tax preparation done well includes a year-one inventory of which state filings apply to the specific business so nothing is missed.
Documentation needed for Texas filings: prior year franchise tax report, federal tax return for the same year (the Texas Comptroller uses federal numbers as the starting point), Texas tax ID (called a WebFile number), entity charter information from the Texas Secretary of State, officer and director details for the Public Information Report. Most Austin businesses use the Texas Comptroller’s WebFile online portal for franchise tax and sales tax filings — the system is decent and far easier than the paper forms.
Where The Reed Corporation fits: we handle all Texas state filings in-house as part of standard Austin tax preparation engagements. Franchise tax, Public Information Report, sales tax (for clients that need it), mixed beverage tax for restaurants, hotel occupancy tax for short-term rental hosts. The point is to integrate state compliance with federal so nothing falls through the cracks. Austin clients who came to us after their previous CPA missed a Texas franchise tax filing for two years (entity in forfeited status, $4,500 in penalties and reinstatement fees) understand why this matters. Get the calendar right the first time and the cleanup never happens.
How does the SALT cap affect Austin tax preparation, and is the $40,400 cap actually helpful?
The SALT (State and Local Tax) cap limits the federal deduction for state and local taxes on Schedule A. The original cap from the 2017 Tax Cuts and Jobs Act was $10,000. OBBBA raised it to $40,400 for 2026 (it reverts to $10,000 in 2030 unless Congress extends it again). The cap applies to the combined total of state and local income taxes, property taxes, and personal property taxes (vehicle registration in some states). For Austin residents, who pay no state income tax, the cap mostly bites on property tax for higher-end homes.
Whether the $40,400 cap helps depends on your property tax bill and other state and local taxes. On a $500,000 Austin home with 2% effective property tax rate, annual property tax is $10,000 — well under the $40K cap, fully deductible. On a $1.5 million Westlake home with 2.1% effective rate, property tax is $31,500 — still under $40K. On a $2.5 million Tarrytown estate with 2.2% effective rate, property tax is $55,000 — the SALT cap chops $15,000 off the deduction. For Austin homeowners in the $500K to $1.5M range, the new cap fully accommodates property tax, which is a real improvement over the old $10K cap.
The math gets more interesting when you add business property taxes, vehicle registration, and any state-level taxes paid (for Austin residents who own real estate in other states, for example). Texas vehicle registration fees, if itemized as personal property tax, are minimal — usually $50 to $100 a year. Business property tax (commercial real estate held in an LLC, equipment in a Schedule C business) doesn’t count against the SALT cap because it’s a business expense, not a personal Schedule A item. This is why Austin tax preparation for real estate investors often involves careful entity structure to keep deductible expenses out of the cap.
Real-world example: an Austin couple with a $1.8M primary residence ($36,000 property tax), $200K of vacant land in Houston ($4,000 property tax), and a $600K rental property in Travis County ($12,000 property tax). The SALT cap analysis: personal Schedule A SALT = $36,000 (primary residence) + $4,000 (vacant land if held personally) = $40,000, just under the $40,400 cap. The rental property tax goes on Schedule E as a rental expense, not Schedule A, so it’s fully deductible against rental income without cap interaction. Total SALT-affected dollars deducted: $40,000 personal + $12,000 rental = $52,000, all deductible because the rental piece bypasses the cap.
The pass-through entity tax (PTET) workaround that exists in roughly 35 states doesn’t help Texas residents. Texas doesn’t have a PTET regime because it doesn’t have a state income tax to begin with. States like California, New York, New Jersey, and Connecticut let pass-through owners deduct state income tax at the entity level (federal Form 1065 or 1120-S deduction) instead of on Schedule A, bypassing the SALT cap. Texas owners don’t have access to this workaround. The federal SALT cap on Texas property tax is what it is, and there’s no clever pass-through mechanism to escape it.
Bunching deductions is a strategy that still works under the new cap. The idea is to alternate years — itemize one year by stacking charitable contributions, then take the standard deduction the next year. For Austin homeowners close to the standard deduction threshold (high-30K range for married filing jointly), bunching can extract $3,000 to $8,000 of additional federal tax savings over a two-year cycle compared to itemizing every year at marginal levels. Donor-advised funds (Fidelity Charitable, Schwab Charitable) are the tool that makes this work.
Itemize-versus-standard math under the new cap: 2026 standard deduction is $32,200 for married filing jointly. To benefit from itemizing, an Austin couple needs total itemized deductions over $32,200. With $40,000 in SALT alone plus typical mortgage interest of $15,000+ on a 2025-rate mortgage, plus any charitable contributions, itemizing is almost always the better answer for Austin homeowners with $400K+ home values. For renters or owners of low-value homes, the standard deduction usually wins.
AMT interaction is a wrinkle the new cap creates. AMT disallows the SALT deduction entirely — for AMT purposes, you don’t get any state and local tax deduction. The good news is that AMT exemptions are high ($85,700 single / $133,300 married filing jointly for 2024, with phase-outs starting at $609,350 / $1,218,700). Most Austin residents don’t hit AMT because Texas has no state income tax, which keeps regular taxable income and AMTI closer together than they would be in California or New York. But ISO exercises (covered separately) still create AMT exposure independent of SALT.
Documentation needed for SALT deduction: property tax statements from Travis Central Appraisal District (downloadable from traviscad.org), tax bills from the Travis County Tax Office, vehicle registration receipts if claimed as personal property tax, and records of any other state and local taxes paid. Austin tax preparation done well captures all of these systematically rather than asking the client to dig through paperwork in April.
Where The Reed Corporation adds value here: we run the itemize-vs-standard analysis automatically every year, we coordinate with rental property accounting to keep deductible expenses on the right schedule (Schedule E vs Schedule A), and we model bunching strategies multi-year for clients who are at the threshold. The cap is the law — we can’t escape it — but we can sequence deductions and structure entity ownership to extract the maximum allowable federal benefit. That’s the kind of Austin tax preparation work that requires planning, not just filing.
What’s the deadline structure for Austin businesses, and how do federal and Texas franchise tax interact in Austin tax preparation?
The deadlines run on two parallel calendars and missing one doesn’t excuse missing the other. Federal entity returns: Form 1120-S (S-corporations) and Form 1065 (partnerships and multi-member LLCs) are due March 15, 2026 for calendar-year 2025 reporting. C-corporations file Form 1120 by April 15. Sole proprietors file Schedule C as part of the personal Form 1040 by April 15. Each of these has a six-month automatic extension via Form 7004 (entities) or Form 4868 (individuals), filed by the original due date.
Texas franchise tax sits on a separate May 15 deadline. The Texas Comptroller doesn’t care what month your federal return is due — the franchise tax report (Form 05-158, 05-169, or 05-163 depending on tax due) and Public Information Report (Form 05-102) are both due May 15, 2026 for the 2025 reporting year. Automatic extension to November 15 is available by filing Form 05-164 by May 15. Austin tax preparation that doesn’t track both calendars systematically misses one or the other every year.
Estimated tax deadlines are the most commonly missed by Austin business owners. Federal quarterly estimates are due April 15, June 15, September 15, and January 15 of the following year. The safe harbor under IRC §6654 requires payment of either 100% of last year’s federal tax (110% if prior year AGI exceeded $150,000) or 90% of current year tax. Falling short triggers underpayment penalty calculated separately for each quarter, even if you eventually pay in full at filing time. The penalty is interest-rate based and adds up fast in high-rate environments.
Payroll tax deadlines for Austin businesses with W-2 employees are stacked monthly and quarterly. Form 941 (quarterly federal payroll) is due April 30, July 31, October 31, and January 31. Form 940 (FUTA, annual) is due January 31. Texas Workforce Commission UI returns (Form C-3) are quarterly, due similar dates as Form 941. Federal payroll tax deposits are made via EFTPS either monthly (smaller employers) or semi-weekly (larger), with deposit deadlines depending on the lookback period payroll volume.
Real-world Austin scenario: an S-corporation owner with $400K in revenue files Form 1120-S on March 15, then receives the K-1 to file the personal Form 1040 by April 15, then files Texas franchise tax on May 15. Three filing events for one business, plus quarterly estimated tax payments throughout the year. The owner missed the Texas franchise tax filing one year because she assumed it was bundled with the federal return. The Comptroller sent a notice, the LLC went into not-good-standing status temporarily, and the penalty plus reinstatement fee was $850. Austin tax preparation done right catches this in the engagement calendar, not after the notice arrives.
Federal-Texas interaction matters at the deduction level. Texas franchise tax is deductible on the federal return as a state tax under IRC §164. For C-corporations, it’s deducted on Form 1120 as a business expense. For S-corporations, partnerships, and single-member LLCs, the deduction flows through to the owner via the K-1 or Schedule C, then ultimately to the owner’s Schedule A (where it’s subject to the $40K SALT cap). For sole proprietors filing Schedule C, franchise tax paid is a business expense deductible against Schedule C income, bypassing the SALT cap entirely. Good Austin tax preparation routes the deduction to the most beneficial schedule when there’s a choice.
Texas sales tax filing deadlines run on a separate cadence determined by liability. Monthly filers (over $1,500/month in average tax) file by the 20th of each month. Quarterly filers (between $500 and $1,500/month) file by the 20th of the month following quarter-end. Annual filers (under $500/month) file by January 20. Austin restaurants typically file monthly given their volume. Austin tech consulting businesses usually don’t have sales tax obligations because professional services are generally not taxable in Texas.
Documentation calendar an Austin business should maintain: a master spreadsheet or accounting software calendar with every filing deadline and estimated tax payment date for the year. Quarterly board meetings (for corporations) on file. Annual minutes for LLCs even when not legally required. Federal and state tax payment receipts archived by date. Texas franchise tax WebFile login credentials and WebFile number stored securely. Most of this is administrative housekeeping but it’s the difference between smooth Austin tax preparation and February panic.
Late-filing penalties stack up. Federal late-filing penalty under IRC §6651 is 5% of unpaid tax per month up to 25%. Texas franchise tax late-filing penalty starts at 5% if 1-30 days late and goes to 10% if more than 30 days late, plus interest at the prime rate plus 1%. Sales tax late filing in Texas is the same 5%/10% structure. These penalties are non-deductible federally, so they’re paid with after-tax dollars. The cost of missing deadlines is meaningfully higher than the cost of getting compliance right the first time.
Where The Reed Corporation adds value: we maintain a master tax calendar for every client showing every federal, Texas, and Austin-specific deadline for the year, with reminders sent 30, 14, and 7 days before each deadline. We file extensions proactively when documentation is incomplete rather than rushing to file inaccurate returns. We coordinate quarterly estimate payments against actual income trajectory mid-year to prevent surprise underpayment penalties. The compliance calendar is the foundation of Austin tax preparation done well — everything else builds on top of it.
How does Austin tax preparation differ for remote workers earning from out-of-state clients?
Remote workers in Austin invoicing clients in other states face two layers of state tax complexity: convenience-of-employer rules that some states apply to W-2 employees, and source-of-income rules that all states apply to 1099 contractors and freelancers. Texas has neither because it has no state income tax. But the other states do, and they can claim taxing authority over income earned by an Austin resident if the rules say so. Austin tax preparation that ignores this creates real liability years down the line.
Convenience of employer is the more aggressive rule. Six states — New York, Pennsylvania, Nebraska, Delaware, Connecticut, and Arkansas — treat days worked remotely as if they were worked at the employer’s office location, unless the remote work was for the employer’s convenience rather than the employee’s. The taxpayer-friendly interpretation is rare. New York is the most aggressive on this. If you live in Austin, work for a New York-based employer who has a New York office you could theoretically commute to, New York may treat your wages as New York-source and impose New York state income tax. The rule is in 20 NYCRR 132.18(a).
Source-of-income rules apply to 1099 contractors and freelancers. California is particularly aggressive under R&TC Section 17951. If an Austin freelance software developer writes code for a California client, California may claim the income is California-sourced because the customer benefited in California — even though the developer never set foot in California. The defense is documentation: contract specifying where work is performed, time records, no California physical presence, no California economic nexus. Austin tax preparation for freelancers with California clients should include a defensive paper trail in case California audits later.
Real-world example: an Austin marketing consultant with $250,000 in revenue split as follows: $120K to California clients, $80K to Texas clients, $50K to New York clients. California Franchise Tax Board sent a notice claiming $7,500 in state tax on the California-source income (based on 9.3% bracket calculation). New York didn’t pursue because of nexus thresholds. Defending the California position required: contracts showing work performed in Austin, time records, lack of California office or property, no California employees. Resolution after 8 months: California dropped the claim. Total professional fees to defend: $3,200. Austin tax preparation that anticipates this and documents preemptively prevents most of the cost.
Economic nexus thresholds vary by state. California: $500,000 in California sales for sales/use tax, $700,000+ for income tax nexus. New York: $500,000 in sales plus 100 transactions for sales tax. Texas: $500,000 for sales tax. These are sales tax thresholds and don’t directly trigger income tax for service businesses, but the underlying principle — states pursuing nexus aggressively — applies across tax types. Austin freelancers and businesses scaling revenue should track customer state breakdowns annually to stay ahead of nexus questions.
Move-year returns are particularly complex for Austin residents who relocated from a high-tax state. A part-year California or New York return is required for the portion of the year before establishing Texas residency. Defining the residency change date is fact-specific and matters a lot — California pursues domicile-based residency aggressively and considers factors like driver’s license, voter registration, primary residence location, family location, business location, and time spent in each state. An Austin tax preparation engagement for a move-year client should include documentation of the residency change with specific dates and supporting evidence.
Reciprocity agreements don’t exist between Texas and other states because Texas has no state income tax to reciprocate. Some state pairs (Illinois and Wisconsin, for example) have agreements that let residents of one state work in the other without state tax filing. Texas has none of these. Austin remote workers who travel for business to other states may trigger nonresident filing obligations in those states based on day-counts — California’s threshold is generally 14 days, but it varies. Multi-state withholding from employer payroll should match the actual work location pattern.
Self-employment tax for Austin freelancers is the same regardless of where clients are located. The 15.3% rate (12.4% Social Security on the first $168,600 in 2024 / $176,100 in 2025, plus 2.9% Medicare with no cap) applies to net self-employment earnings on Schedule SE. State-level self-employment tax doesn’t exist in Texas. The federal self-employment tax is the largest single tax burden for most Austin freelancers and is the primary reason to consider S-corporation election once net earnings exceed roughly $50,000-$75,000 a year.
Documentation needed for multi-state Austin tax preparation: contracts and engagement letters showing where work is performed, time tracking with dates and locations, travel records for any work done in other states, customer state and address records, Texas residency proof (driver’s license, voter registration, primary residence documentation), and any state withholding records from employers. Multi-state freelancers should track this systematically rather than reconstructing it during a future audit.
Where The Reed Corporation adds value: we handle multi-state returns for Austin clients who have nexus exposure or who relocated from California, New York, or other high-tax states. We document residency changes proactively. We respond to state-level notices when they arrive. And we structure freelance and consulting engagements to minimize multi-state exposure where the contract terms can be set in advance. Austin tax preparation for remote workers requires both federal expertise and a working knowledge of how California, New York, and other aggressive states pursue Texas residents. That’s the engagement we built.