Taxes: expense or liability?

Jason Rennie jrennie@ai.mit.edu
Sat, 06 Jan 2001 10:13:45 -0500


I can say that I've switched my tax accounts between "Expenses" and 
"Liabilities" at least once or twice.  It seems very easy to think of it 
as either one based on your point of view.  Personally, I consider taxes 
to be an expense.  The reason is that, for the most part, it's something 
that I pay immediately any time I receive income.  I see the year-end 
"taxes" that we file as merely being an adjustment to make sure that all 
the numbers add up correctly.  As you say, it's similar to the case where 
you overpay the electric company and they issue you a rebate check.

In the case of most liabilities, there is a specific amount that you owe 
and you pay that off over time, incurring finance charges based on the 
amount that you owe.  In the "normal" case, this never happens with 
taxes.  During the year, you pay amounts approximating what you owe based 
on your income.  At the end of the year, you resolve any discrepancies.

Jason D. M. Rennie      www.ai.mit.edu/~jrennie/
MIT:  (617) 253-5339          jrennie@ai.mit.edu