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Simple English definitions for legal terms
tax accounting
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A quick definition of tax accounting:
Tax accounting refers to the set of rules and methods used to calculate how much money a person or business owes in taxes. It's like a special kind of accounting that focuses only on taxes. Just like how you have to follow certain rules when playing a game, taxpayers have to follow certain rules when it comes to taxes. Tax accounting helps make sure everyone is following the same rules and paying their fair share.
A more thorough explanation:
Tax Accounting
Tax accounting refers to the set of accounting rules and methods used to calculate a taxpayer's liability to pay taxes.
- Keeping track of income and expenses for a small business to determine the amount of taxes owed to the government.
- Calculating the tax liability of an individual based on their income, deductions, and credits.
For example, if a small business owner wants to determine how much they owe in taxes, they need to keep track of all their income and expenses throughout the year. They can then use tax accounting methods to calculate their tax liability based on their taxable income and applicable tax rates. Similarly, an individual can use tax accounting to calculate their tax liability based on their income, deductions, and credits.