Accounting For Income Taxes

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What is income tax?

Income tax is referred to a type of direct tax the central government imposes on the income earned during a financial year by the corporates and business owners. The tax computation is based on the income slab rates applicable during that financial year. These taxes are sources of revenue for the government and it utilizes this revenue for developing infrastructure, administering healthcare, education, granting aid to the farmer/agriculture sector and in various other welfare projects. Every citizen must pay the income tax. If an individual or a company fails to file or pay for their due taxes, there is a chance of certain liabilities being imposed on them by the relevant tax authority such as IRS. To avoid such liabilities The TaxTactics Firm offers you a suitable income tax service. Contact us now and get your business back on track!

What is accounting for Income Taxes?

Tax accounting is one of the significant factors that contribute in the field of accounting. The key accounting for income taxes is to acknowledge tax liabilities for estimated income taxes payable, and determine the tax expense for the contemporary period. Before moving forward you should recognize some key points to gain a deeper understanding of accounting for income taxes. These factors are mentioned below:

1. Accounting Profit

Accounting profit is referred to the profit displayed in ‘profit & loss’ statement including all the income and expenses but excluding tax.

2. Taxable Profit

Taxable profit is referred to the profit arrived according to the tax laws and on which you are required to pay the tax in compliance with the laws.

3. Current Tax

The current tax is referred to the tax which is payable or paid on taxable profit according to the applicable tax rate of the current year.

4. Deferred Tax

Deferred tax is referred to the tax that a company will ultimately pay on its taxable income, but which are not yet due for payment. This is caused by timing difference.

5. Temporary / Timing Differences

Timing differences are the variations in the calculation of taxes in the local tax regulations and in the accounting structure that a company uses.

Objectives in Accounting for Income Taxes

The Accounting for Income Taxes gives insight to the taxpayers in order to avoid the imposition of tax liabilities that might be raised against your company by a tax agency. There are several terminologies and procedures that combines together to reduce the odds of tax liabilities, as mentioned below:

1. Boost After-Tax Profits

First and foremost step is to ensure company’s income tax accounting is in harmony with its operating strategy.

It is essential for a company to understand how it draws tax liabilities and revamp its strategies accordingly in order to maximize its profits.

2. Reviewing Funds

Income tax accounting allows the company to maintain financial flexibility and resilience. Funding the company’s operations with debt and a company’s capital structure may have various impacts that can influence its tax liability.

Acknowledging these impacts gives the company insight on how to draft a plan accordingly and transitively maintain its financial flexibility by offering numerous options.

3. Timing Control of Payments

Lastly, Accounting for Income Tax offers the company to supervise cash flow and reduce cash taxes paid. Opposing taxes and defying from paying is not a good option; postponing them into the future is more preferable.

A company will want to collect tax deductions sooner rather than later to avoid any waste of time of their company.

Our Accounting for Income Tax services

The TaxTactics Firm is a private business firm which offers top notch services to a vast client base. Like our any other Tax Services we tend to serve our customers in accounting for income taxes with complete devotion.

Our consistent and recurrent clients not only encourage us to keep up the effort but also motivate new clients to seek our services.

We especially welcome startup companies. We understand the delicacy of their situation and serve them accordingly.

We fulfill all that is mentioned under the heading of Objectives in Accounting for Income Taxes!