# are tax refunds to a corporation considered taxable income?



## user (Sep 21, 2009)

If not, how is it classified?


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## MrMatt (Dec 21, 2011)

A tax refund is just a return of your money.
Lets say you make $100, you give $50 to the government for "tax", at the end of the year the calculations show you should pay $30 tax, they refund the $20 overpayment to you.

It's really not a tax/income issue at all.


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## uptoolate (Oct 9, 2011)

Well it is 'income' but it is income from the previous tax year and therefore taxes have already been paid on it. Otherwise, agree with MrMatt. In his example, the government is just returning the $20 that you mistakenly lent them for some period of time. This is why most [wise] people aim to owe tax at the end of the year rather than have a refund coming back. Then they can have the money working for them and not the government.


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## OurBigFatWallet (Jan 20, 2014)

Tax refunds are a balance sheet adjustment. Same as taxes payable. Taxes receivable are called a current asset whereas taxes payable are a current liability. Once the cash comes out (or is received) the other side of the accounting entry is the adjustment to the balance sheet account.


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## uptoolate (Oct 9, 2011)

^ What they said!


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