Question

How do I find income tax expense

Answer 1

• TAX EXPENSES :- A tax expense is a liability owing to federal, state/provincial and municipal governments. Tax expenses are calculated by multiplying the appropriate tax rate of an individual or business by their income before taxes, after factoring in such variables as non-deductible items, tax assets and tax liabilities.

• Income tax expense is the amount of expense that a business recognizes in an accounting period for the government tax related to its taxable profit. The amount of income tax expense recognized is unlikely to exactly match the standard income tax percentage that is applied to business income.

Difference between income tax expenses and incoke tax payable :-

"Income tax expense" is what a company has calculated that it owes in taxes based on standard business accounting rules. The company reports this expense on its income statement. "Income tax payable" is the actual amount that the company owes in taxes, based on the rules of the tax code. Income tax payable appears on the balance sheet as a liability until the company actually pays the tax bill.

The formula for tax expense is:

Tax Expense = Effective Tax Rate x Taxable Income

EXAMPLE :- let's assume the Company XYZ has an effective tax rate of 35%. The company's taxable income (that is, income net of tax deductions and non-taxable items) is $1,000,000. According to the formula, Company XYZ's tax expense would be:

-->> Tax Expense = $1,000,000 x 0.35 = $350,000

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.