Business, Legal & Accounting Glossary
A tax liability is simply a legal claim on assets or income. Liability is anything owed to another entity, whether that entity is an individual, organization, or government. Therefore, a tax liability is the tax owed by an individual or organization to an authority entity. A tax liability is not paid at the point at which it is created; it becomes a responsibility to be paid in the future. Tax liability is calculated by applying the current tax rate to what is called a taxable event. A taxable event includes the sale of an asset, inheritance and annual income. A tax liability is considered a short-term liability. Failure to satisfy a tax liability could result in legal action such as financial penalties, garnishment of wages, or foreclosure on a particular asset. A tax liability can be satisfied with estimated, periodic tax payments, withholdings from income, or a fiscal year-end payment accompanying tax forms.
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This glossary post was last updated: 5th February, 2020 | 30 Views.