Tax Liability

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Definition of 'Tax Liability'

A tax liability is the amount of tax that an individual or entity owes to a government. It is calculated by subtracting the amount of tax deductions and credits from the total amount of taxable income. The tax liability is then multiplied by the applicable tax rate to determine the amount of tax owed.

There are a number of factors that can affect an individual's or entity's tax liability, including the type of income earned, the amount of deductions and credits claimed, and the applicable tax rates. The tax liability can also be affected by changes in the tax law.

It is important to understand your tax liability in order to ensure that you are paying the correct amount of tax. You can calculate your tax liability using the IRS's Tax Withholding Estimator or by hiring a tax professional.

Once you have calculated your tax liability, you can pay the amount owed by filing a tax return. The due date for filing a tax return varies depending on the type of return you are filing. For most individuals, the due date is April 15th. However, there are some exceptions to this rule, such as for those who are filing for an extension.

If you do not pay your tax liability on time, you may be subject to penalties and interest. The amount of the penalty will depend on the amount of tax owed and the length of time that the tax is unpaid.

It is important to stay up-to-date on the latest tax laws and regulations in order to ensure that you are complying with all tax requirements. You can find information on the latest tax laws and regulations on the IRS website.

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