Taxes attributable to activity already recorded but not yet paid, including current income tax, payroll-related tax, and other tax payables.
Accrued taxes are tax obligations attributable to income, payroll, property, or transactions that have already occurred but have not yet been paid. In accounting, the amount is generally recorded as a liability when the reporting entity has a present obligation and can reasonably measure it. The label is descriptive rather than a single accounting-standard category, so readers should identify which tax and which underlying transaction created the balance.
The account name depends on the tax and the entity’s chart of accounts. Common balances include:
| Balance | What created it | Typical accounting character |
|---|---|---|
| Current income tax payable | Taxable profit for the current or prior period, less installments or credits | Tax expense and a current tax liability |
| Employer payroll tax payable | Employer taxes arising from payroll already earned | Compensation-related expense and a liability |
| Employee withholding payable | Amounts withheld from employee pay for remittance | Liability; not an additional employer expense |
| Sales or similar tax payable | Tax collected from a customer on behalf of a tax authority | Liability when the entity acts as collection agent |
| Property tax accrual | Tax attributable to property held during the relevant assessment period | Expense and a liability, subject to applicable rules |
The table is a classification guide, not a substitute for the governing tax law or reporting framework. Some taxes may be included in an asset’s cost, inventory, compensation, or another expense rather than presented as a separate tax expense.
Suppose a company estimates current income tax expense of $120,000 for the year. It paid $90,000 of installments during the year and recorded them as a current tax receivable or prepaid tax. At year-end, the remaining $30,000 is unpaid.
The year-end entry can be summarized as:
1Dr Current Income Tax Expense $120,000
2 Cr Current Tax Receivable $90,000
3 Cr Income Tax Payable $30,000
The $30,000 payable is an accrued tax. The full $120,000 is the current tax expense for the example, while the cash already paid reduces the amount still owed. Actual tax accounting may also include uncertain tax positions, refundable amounts, prior-period adjustments, and deferred tax.
When the remaining balance is paid:
1Dr Income Tax Payable $30,000
2 Cr Cash $30,000
Assume a retailer receives $108,000 from customers: $100,000 for goods and $8,000 collected for a tax authority. If the retailer is acting as an agent for the tax, it records revenue separately from the amount owed to the authority:
1Dr Cash $108,000
2 Cr Revenue $100,000
3 Cr Tax Payable $8,000
Calling the entire $8,000 an “accrued tax expense” would misstate the economics. The retailer collected the amount from customers and holds it as a liability until remittance. The same distinction matters for employee deductions withheld from payroll: the withheld amount is payable to the government, but it is not a second wage expense.
| Question | Accrued or current tax | Deferred tax |
|---|---|---|
| What causes it? | A current obligation from taxable activity, payroll, property, or collection | A temporary difference between an accounting carrying amount and its tax base, or certain carryforwards |
| Is cash payment expected soon? | Often, although due dates vary | Not a direct bill with a single payment date |
| Typical balance | Tax payable or tax receivable | Deferred tax asset or deferred tax liability |
| Main analytical issue | Completeness, cutoff, measurement, and settlement | Reversal pattern, applicable tax rate, and realizability |
An unpaid current income tax amount can coexist with both a Deferred Tax Asset and a deferred tax liability. The balances answer different questions and should not be netted merely because each contains the word “tax.”
An understated tax payable can overstate working capital and profit, while an excessive accrual can understate them. For analysts, changes in tax payables can also explain part of the difference between tax expense and operating cash flow. A growing balance is not automatically favorable cash management: it may reflect normal timing, a disputed amount, a missed payment, or a change in taxable activity.
Tax calculations depend on the reporting framework, tax type, legal entity, and jurisdiction. This page is educational and does not provide accounting, tax, legal, audit, or investment advice.