Course Outline
Join PRO

Is income tax an expense or liability?

Author:
Harold Averkamp, CPA, MBA

Definition of Income Tax

In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied based on a corporation’s taxable income. The taxable income and the related income tax are found on the corporation’s income tax return. (The corporation’s taxable income is based on the income tax laws and regulations of the various governments.)

The accounting and financial reporting of a regular corporation’s income taxes is complicated because the accounting principles are likely to be different from the income tax laws and regulations. Generally, a profitable regular corporation’s financial statements will report both income tax expense and a current liability such as income taxes payable.

Examples of Income Tax Expense and Income Taxes Payable

A profitable corporation’s financial statements will report:

  • Income tax expense on its income statement for the revenues and expenses appearing on the accounting period’s income statement, and
  • Income taxes payable (a current liability on the balance sheet) for the amount of income taxes owed to the various governments as of the date of the balance sheet

If a corporation has overpaid its income taxes and is entitled to a refund, the amount will be reported on the balance sheet as a current asset such as Other receivables.

If there are differences between the time when certain revenues and expenses are reported on the income tax returns versus when they are reported on the financial statements, the amount of the deferred income tax will likely be reported on the balance sheet as a noncurrent liability as Deferred income taxes.

Join PRO to Track Progress
Must-Watch Video

Learn How to Advance Your Accounting and Bookkeeping Career

  • Perform better at your current job
  • Refresh your skills to re-enter the workforce
  • Pass your accounting class
  • Understand your small business finances
Watch the Video

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,645 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Certificates of
Achievement

Certificates of Achievement

We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping:

  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Payroll Accounting
Badges and Points
  • Work towards and earn 30 badges
  • Earn points as you work towards completing our course
View PRO Plus Features
Course Outline
Take the Tour Join Pro Upgrade to Pro Plus