What is Tax payable?
Taxes payable are the sums owed by a business in federal, provincial, and municipal taxes.
“Income tax payable” is a financial accounting liability that indicates the amount that an organisation expects to pay in income taxes within the next 12 months. It is shown on a company’s balance sheet in the current liabilities section.
Income tax payable is calculated in accordance with generally accepted accounting principles (GAAP), taking into account the tax rates in the laws of the jurisdictions where the organisation is taxed. Taxpayers in the United States are subject to federal, state, and local tax laws, as well as the tax laws of any other countries in which they operate and generate income.
In general, the taxes owed under applicable tax laws for the majority of events reported in the financial statements for a year are included in the amount reported on an organization’s balance sheet as income tax payable. Income tax is shown as a current liability to the extent that it will be resolved, i.e. paid, within the next 12 months. Deferred income tax liabilities are tax liabilities that have accrued in a year but whose payment is due in a later year.
Some GAAP rules governing financial accounting for an event generating income or loss differ from tax-law requirements for reporting the same event on tax returns.