What are Taxes Payable?

Taxes payable refers to one or more liability accounts that contain the current balance of taxes owed to government entities. Once these taxes are paid, they are removed from the taxes payable account with a debit. Many taxes payable are paid within a short period of time, and so do not remain on an organization’s balance sheet for long.

Examples of Taxes Payable

An example of taxes payable is the sales taxes payable account, for which the liability is recorded at the time a customer is invoiced, with a debit to the accounts receivable account. Another example is corporate income taxes payable, for which the liability is recorded at the end of each accounting period, with a debit to the income tax expense account - assuming there is a taxable profit. A third example is payroll taxes payable, for which the liability is recorded when a payroll is calculated, with a debit to one of several possible payroll expense accounts.

Presentation of Taxes Payable

Taxes payable are almost always considered to be current liabilities (that is, to be paid within one year), and so are categorized within the current liabilities section of the balance sheet. The various taxes payable accounts may be aggregated into a single "taxes payable" line item in the balance sheet for presentation purposes.