Tax Liability

  

Categories: Tax, Accounting

Taxes you owe. For individuals, we generally pay our taxes quarterly, so we carry a very short-term liability on what we owe and then...just pay it to The Man. Or The Wom.

For corporations, things get more complex, and the numbers bigger. They sell a division in Q1 and owe on the $100 million gain. They pay 30% marginal tax, so they carry a tax liability of $30 million for...a while. Maybe they pay it all as a quarterly, but more likely they pay at the end of the year, showing as a tax liability..."Taxes Owed" of something like $30 million (plus whatever other taxes they owe).

Like this noodling? Then check out our CPA career guide. It's calling your name.

Related or Semi-related Video

Finance: What is Capital Gains Tax?7 Views

00:00

Finance a la shmoop what is capital gains tax? alright people you've invested

00:08

your hard-earned savings from working 72 hours a week all year you put 10 grand

00:13

to work seven years ago in buying Heinz ketchup stock at 50 bucks a share

00:18

200 shares then this year along comes Warren Buffett and Berkshire Hathaway to [Warren and Berkshire appear]

00:23

confirm what a brilliant investor you were and they buy for all cash the

00:28

company Heinz ketchup for $200 a share you've made four times your money in

00:33

seven years nice work well you have a gain of 150 bucks a share which you are

00:38

gonna fully realize like you'll realize that capital gain in the form of

00:43

receiving cash like oh I realize I have cash in my bank account yay me!

00:47

so all this was so good such a nice day until you realize that you live in a [Woman frollocking in a meadow]

00:53

blue state with massive taxes and that you'll now give back about a third or

00:58

more of your investment gains that is you invested 10 grand it became 40 grand

01:04

the old-fashioned way you had 30 grand of profits and now uncle sam says i want [Uncle Sam demanding I want your cash]

01:10

your cash and you now pay about 10 grand roughly a third of it in taxes of

01:17

your gains of that 30 grand back to Uncle S, sadly you are paying back in

01:22

taxes about the same amount you invested in the first place yep lots of hard work

01:27

lots of taxes how's that feel?

Up Next

Finance: What is a Consumption Tax?
10 Views

What is a Consumption Tax? A consumption tax is one that is charged at the time of purchase for a product or service. Consumption taxes can include...

Finance: What is a tax haven?
1 Views

A tax haven is a nation that offers special tax incentives for corporations doing business there.

Finance: What is Tax Loss Carry-Forward?
328 Views

What is tax loss carry-forward? We promise it's a real thing, not just a bunch of words strung together.

Find other enlightening terms in Shmoop Finance Genius Bar(f)