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On the Divergence between Corporate Tax Expense and Tax Paid

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The document analyzes the divergence between GAAP-based and cash-based measures of corporate tax burdens, revealing that significant differences reported in prior research are largely due to sample selection biases, such as excluding loss firms and using asymmetric winsorization. The study finds that when these factors are controlled for, average tax divergence is minimal, although substantial cross-sectional variation exists. It also explores how public scrutiny and governance strength influence tax divergence, concluding that firms facing greater scrutiny tend to report higher GAAP tax expenses relative to cash taxes paid. The findings have implications for investors and researchers regarding the interpretation of corporate tax burdens.

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Is income tax expense on the balance sheet?

Income tax payable is found under the current liabilities section of a company's balance sheet.

What is income tax paid?

Income tax paid is the total amount of IRS Form 1040-line 14 minus Schedule 2-line 2. See the images below that show you where to find Form 1040-line 14 and Schedule 2-line 2.

What is the relationship between tax expenses and taxes paid?

Tax Expense vs. The tax expense is what an entity has determined is owed in taxes based on standard business accounting rules. This charge is reported on the income statement. The tax payable is the actual amount owed in taxes based on the rules of the tax code.

Is income tax payable an expense?

"Income tax expense" is what you've calculated that our company owes in taxes based on standard business accounting rules. You report this expense on the income statement. "Income tax payable" is the actual amount that your company owes in taxes, based on the rules of the tax code.

How do you calculate income tax expense on an income statement?

Tax expense is usually the last line item before the bottom line\u2014net income\u2014on an income statement. For example, if a company earned $100,000 before taxes and paid $25,000 in taxes, then the effective tax rate is equal to 25,000 ÷ 100,000, or 0.25.

Is income tax expense an expense or liability?

Income tax expense is a component that features on the income statement under the heading of 'other expenses. ' it is a type of liability on the business or an individual. It is a tax levied by the government on a business's earnings and an individual's income.

Is income tax paid an expense?

Taxes on income are considered to be an expense incurred by the enterprise in earning income and are accrued in the same period as the revenue and expenses to which they relate.

What is tax paid?

having been paid for by taxation.

Is income tax expense on the balance sheet?

Income tax payable is found under the current liabilities section of a company's balance sheet.

Are taxes paid before or after expenses?

Income before taxes, or pretax earnings, is a business's net income after all operating expenses\u2014but not taxes\u2014have been paid. This is a useful metric for comparing business performance because it removes the variable of taxes, which change over time and across jurisdictions.

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