Tax Accounting


DEFINITION of 'Tax Accounting'

Accounting methods that focus on taxes rather than the appearance of public financial statements. Tax accounting is governed by the Internal Revenue Code which dictates the specific rules that companies and individuals must follow when preparing their tax returns. Tax principles often differ from Generally Accepted Accounting Principles.

BREAKING DOWN 'Tax Accounting'

Balance sheet items can be accounted for differently when preparing financial statements and tax payables. For example, companies can prepare their financial statements implementing the first-in-first-out (FIFO) method to record their inventory for financial purposes, yet they can implement the last-in-first-out (LIFO) approach for tax purposes. The latter procedure reduces the current year's taxes payable.

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  1. What are some examples of a deferred tax liability?

    In the United States, laws allow companies to maintain two separate sets of books for financial and tax purposes. Because ... Read Full Answer >>
  2. How much will it cost to hire an accountant to do my taxes?

    Tax accounting generally costs less than $100 for simple tax returns, and it takes only a few hours to prepare and complete ... Read Full Answer >>
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    If you are a member of the military, you may be afforded special tax benefits that might not be available to other taxpayers. ... Read Full Answer >>
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  5. Do dividends affect working capital?

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