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April 15, 2009

Is income tax an expense or liability?

The income tax reported on the income statement is the income tax expense which pertains to the revenues and expenses shown on the income statement.

The income taxes to be paid in the near future are reported as a current liability.

If a corporation has overpaid its income taxes, the income taxes to be refunded by the government are reported on the corporation’s balance sheet as a current asset.

There are also balance sheet accounts for deferred income taxes. Deferred income taxes arise when a revenue or expense item is reported on the income tax return in a year that is different from the year the item appears on the financial statements.

More information is contained in Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes. It is available for reading at www.FASB.org/st.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.



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Comments

13 Responses to “Is income tax an expense or liability?”

  1. khan on April 24th, 2009 2:13 pm

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  2. asim razi on April 26th, 2009 3:35 am

    income tax is a liability because it impose on our operating activities when operating activity increases its means company earns more profit and on earning profit every company has to pay some amount of profit set by govt.

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  4. Kristie on May 7th, 2009 3:53 pm

    Income tax is a liability. Eventhough its listed on the income statement as an income tax expense.

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  11. Cindy on July 26th, 2009 2:18 pm

    Can a corporation (1120 form) deduct as an expense the federal income tax paid (in a previous year) on current tax year filing ?

  12. jaco on December 10th, 2009 10:42 am

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