Question

Describe the tax liability of an individual and firm

Answer 1

Tax liability is the amount of money you owe to tax authorities, such as your local, state, and federal governments (e.g., the IRS). When you have a tax liability, you have a legally binding debt to your creditor. Both individuals and businesses can have tax liabilities.

The government uses tax payments to fund social programs and administrative roles. For example, Social Security tax funds retirement and disability benefits.

Tax liabilities are current liabilities. Current liabilities are short-term debts you must pay within a year. Generally, you incur short-term liabilities from normal business operations.