BROWSE

Tax Accounting

Definition

U.S. tax accounting refers to accounting for tax purposes in the United States. Unlike most countries, the United States has a comprehensive set of accounting principles for tax purposes, prescribed by tax law, which are separate and distinct from Generally Accepted Accounting Principles.

What is 'Tax Accounting'

Tax accounting consists of 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.

Explaining 'Tax Accounting'

The purpose of accounting is to track funds associated with an individual or business.

Tax Accounting for an Individual

From the taxpayer sense, accounting would involve the tracking of all funds coming in and out of the persons' possession regardless of the purpose, including personal expenses that have no tax implications. Tax accounting focuses solely on items such as income, qualifying deductions, investment gains or losses, and other transactions that affect the individual’s tax burden. This limits the amount of information that is necessary for an individual to manage an annual tax return, and while a tax accountant can be used by an individual, it is not a legal requirement.

Tax Accounting for a Business

From a business perspective, more information must be analyzed as part of the tax accounting process. While the company’s earnings, or incoming funds, must be tracked just as they are for the individual, there is an additional level of complexity regarding any outgoing funds directed towards certain business obligations. This can include funds directed towards specific business expenses as well as funds directed towards shareholders.

Tax Accounting for a Tax-Exempt Organization

Even in instances where an organization is tax-exempt, tax accounting is necessary. This is due to the fact that all organizations must file annual returns. They must provide information regarding any incoming funds, such as grants or donations, as well as how the funds are used during the organization’s operation. This helps ensure that the organization adheres to all laws and regulations governing the proper operation of a tax-exempt entity.


Further Reading


Public disclosure of corporate tax return information: Accounting, economics, and legal perspectives
www.jstor.org [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

Financial and tax accounting: transparency and “truth”Financial and tax accounting: transparency and “truth”
link.springer.com [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

Comparing the publication process in accounting, economics, finance, management, marketing, psychology, and the natural sciencesComparing the publication process in accounting, economics, finance, management, marketing, psychology, and the natural sciences
meridian.allenpress.com [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

Debt and the marginal tax rateDebt and the marginal tax rate
www.sciencedirect.com [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

Empirical tax research in accounting: A discussionEmpirical tax research in accounting: A discussion
www.sciencedirect.com [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

Factors influencing a firm's accounting policy decisions when tax accounting and financial accounting coincideFactors influencing a firm's accounting policy decisions when tax accounting and financial accounting coincide
www.emerald.com [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

The structure of corporate mergers: Accounting, tax, and form-of-payment choices.The structure of corporate mergers: Accounting, tax, and form-of-payment choices.
elibrary.ru [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

Tax and corporate governance: an economic approachTax and corporate governance: an economic approach
link.springer.com [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

The odd couple: A common future for financial and tax accountingThe odd couple: A common future for financial and tax accounting
heinonline.org [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …

Tax reporting aggressiveness and its relation to aggressive financial reportingTax reporting aggressiveness and its relation to aggressive financial reporting
meridian.allenpress.com [PDF]
… This paper offers an over- view of the issues by providing current and historical perspectives from the fields of ac- counting, economics, and law.1 Grassley's suggestion of making … of the differences between book and tax accounting could be eliminated … The Civil War Income Tax …



Q&A About Tax Accounting


Is it necessary for an individual to use a tax accountant?

No, it is not a legal requirement.

Why do businesses need complicated accounts?

Businesses need complicated accounts because they have more outgoing funds directed towards specific business obligations. This can include funds directed towards specific business expenses as well as funds directed towards shareholders.

What is the purpose of accounting?

Accounting is used to track funds associated with an individual or business.

Is it necessary for a business to use a tax accountant?

Yes, businesses must use accountants because they are more complex than personal taxes.

What does tax accounting focus on?

Tax accounting focuses on items such as income, qualifying deductions, investment gains or losses and other transactions that affect the individuals tax burden.