why do taxes owed to the irs and tax amounts on financial statements differ 
on balance sheets the tax amounts indicate liabilities that affect the organization s value taxes due within 12 months are current liabilities and are designated as income tax payable taxes to be paid in the later periods are designated as deferred tax liabilities the bottom line income tax payable refers specifically to an amount reported on financial statements a liability reported in the current liabilities section of a company s balance sheet that indicates the amount that an organization expects to pay in income taxes within 12 months financial accounting rules for reporting tax liabilities and the tax code s rules for determining the amount of taxes owed to the irs for the same event can differ gaap accounting principles and the us tax code do not treat all items in the same way when calculating the tax amounts reported on financial statements and the tax liabilities reported on tax returns as a result the amount of taxes owed on an organization s tax return may not match the tax expense on its income statement for financial statements the variation in the accounting rules and reasons for determining tax expense and tax liabilities can create different amounts on income statements and balance sheets 