what is income tax payable 
income tax payable is a liability reported for financial accounting purposes it shows the amount that an organization expects to pay in income taxes within 12 months it is reported in the current liabilities section on a company s balance sheet income tax payable is calculated using generally accepted accounting principles gaap using the current tax rates in the jurisdictions where the organization is subject to tax businesses operating in the united states are subject to federal state and local tax laws they must also follow the tax laws of any other countries where they operate and realize income understanding income tax payablegenerally the taxes an organization owes are included in the line income tax payable on the organization s balance sheet income tax payable is shown as a current liability to the extent of the amount that will be resolved i e paid within 12 months 1the generally accepted accounting principles gaap have rules for reporting an event producing income or loss however these differ from the tax law requirements for reporting the same event on tax returns the two systems different depreciation and amortization rules are common causes of timing differences these differences in reporting for the two systems particularly for the timing of tax liabilities are reflected in an organization s financial statements 2tax liabilities that have accrued during the year but which will be paid in a later year are shown on a balance sheet as deferred income tax liabilities for example the total us tax liability for a 2023 event resulting in income of 300 determined using the 2023 corporate federal income tax rate of 21 is 63 3gaap generally requires that all of the 300 in income from an event as well as the total corporate tax liability of 63 must be recognized in the organization s income statement for the year when the event occurred i e 2023 deferring tax liabilitytax liability may be calculated one way using gaap but reported differently for tax purposes tax law may spread recognition of income or a tax liability over multiple years this timing difference will be reflected in the financial statements for the same example if 300 of gaap income for 2023 is spread over three years for tax purposes the 2023 balance sheet will treat the taxes due the irs for 2023 as a current liability i e a current income tax payable of 21 that 21 would be reported as income tax payable on the current liabilities section of the balance sheet the remaining 42 which will be due to the irs in the future would be reported as a deferred tax liability thus a deferred tax liability arises when there is a difference between the current income tax liability reported on an organization s balance sheet and the income tax expense reported on its income statement income tax payable vs income tax expensebalance sheets report the actual amount of taxes owed to the irs categorized either as current tax liabilities income tax payable or deferred income tax liabilities noncurrent longer term liabilities however income tax expense is reported on an organization s income statements 1 this amount usually appears as the last expense item and is a deduction taken from pre tax profit in determining net income or profit for a us corporate taxpayer gaap determines the amount of income tax expense for financial reporting purposes by applying the current corporate tax rate 21 in 2023 to the amount designated as profit before income taxes on the income statement taxes other than income taxes such as payroll taxes property taxes and sales taxes may be identified on financial statements as separate tax categories they also may be included in a comprehensive tally of tax expenses on an income statement and of tax liabilities on a balance sheet upon completing its federal income tax return an organization knows the actual amount of taxes due to the us government for that tax year the taxes payable within a year are reflected on the balance sheet as current income tax liabilities taxes due in future years are listed as deferred income tax liabilities if the corporation also owes state local or foreign income taxes its balance sheet will reflect those liabilities as well 