What Is Income Tax Receivable?

by Marquis Codjia

A company's leadership puts into place various strategies and tactics to make money, abide by the law, rein in waste and break the operational impasse that may arise every now and then. Part of that quest for regulatory compliance lies in a willingness to report accurate fiscal data and pay income taxes -- recording income tax receivables in conformity with accounting rules.

Income Tax Receivable

Income tax receivable is money a company expects from the Internal Revenue Service as well as state, county and municipal revenue agencies. Think of it as cash the government owes a corporate or individual taxpayer who has remitted more money than due. For example, a company's controller computes that fiscal debt amounts to $1 million at year-end. During the year, the business has made quarterly payments totaling $1.2 million. As a result, company records will show an income tax receivable amount of $200,000, or $1.2 million minus $1 million.


Calculating and monitoring the amount of money a business expects from fiscal authorities is an exercise in financial management, an initiative that enables department heads to run efficient activities and use operating funds wisely. Given the importance of the fiscal element in a company's activities, top leadership may hire specialists to formulate adequate tax-planning strategies, to abide by the law without breaking the corporate bank and to make the organization's case to a larger forum of regulators. Tax specialists include certified public accountants, IRS enrolled agents, financial planners and tax accountants.

Accounting and Financial Reporting

To record fiscal expense, a corporate bookkeeper debits the income tax expense account and credits the cash account. In a financial lexicon, crediting cash -- an asset account -- means reducing company money. When in-house treasurers determine that the business has sent more tax dollars to authorities than applicable, the bookkeeper debits the income tax receivable account and credits the income tax expense account. Income tax receivable is a short-term account because the business expects to receive a refund in the next 12 months; otherwise, it's a long-term resource. Cash and income tax receivable flow into a statement of financial position, also referred to as a statement of financial condition or balance sheet.

Personnel and Technology

Corporate leadership relies on an army of dedicated professionals to track fiscal data, recover tax revenues, recover bad debt and initiate litigation against noncompliant taxpayers. These personnel include financial accountants, tax accountants, financial managers, budget specialists and tax advisers. To perform tasks adeptly, these professionals use state-of-the-art technological tools -- such as accounts receivable and payable management software, mainframe computers, information retrieval or search programs, financial analysis software and document management applications.

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