Question

how do I calculate income tax on the income statement without listed income tax.

Answer 1

Income tax is an expense. It must appear in the Income Statement. If it is not there, it should be calculated and inserted as per the following steps:

Step 1) Taxable income is to be searched through the Income Statement. This is simply the difference between revenues and expenses before tax.

Step 2) Appropriate rate of tax should be searched through the Internal Revenue Service (IRS) journal. The tax rate depends on taxable income (such as, higher income has higher tax rate). Tax rate varies year to year (suppose 2018’s income tax slab). Therefore, the current journal is required for current tax rate.

Step 3) The taxable income is to be multiplied by the current tax rate in order to get income tax expense.

Step 4) Lastly, the income tax expense should be included in the Income Statement and to be subtracted from the taxable income for arriving at Net Income.