Income Tax Payable is an account on a company’s ledger where they reserve amounts that will be used to pay the tax liability in the current quarter or year.
This account tends to be separate from payroll taxes and sales taxes. This account will typically be empty at the end of the fiscal year. Corporations must pay income taxes based on their gross income, and the funds to pay them are held in the Income Tax Payable account on their company ledger.
Pass through entities such as certain S-Corps will not pay taxes on behalf of the partnership, but the tax liability will be passed on to the owners or shareholders. C-corporations will always owe corporate income taxes, however, on a Federal and a state level (except in a few states).
Unless the company is making less than $335,000 (as of 2016), the corporation will pay an effective rate of about 34% in Federal income taxes. A company that owns controlling interest in other companies will file a consolidated return for all of the companies. Companies must pay into the estimated withholding amount with quarterly filings.
Corporate income taxes can cause companies to set up in another country with more favorable tax treatments.
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There are exceptions to this, in the form of no-appraisal mortgages which are available to lower-income homeowners