Pass through income , this does not sound right. Help.

[Penelope]

The changes to the taxation of passthrough businesses are some of the most complex provisions in the new law, in part because of lots of limitations and antiabuse rules. They’re designed to help prevent gaming of the tax system by taxpayers trying to have income taxed at the lower passthrough rate rather than the higher individual income tax rate. For many pass-through businesses, for example, the 20% deduction mentioned above phases out for taxpayers with incomes in excess of $157,500 on an individual return and $315,000 on a joint return. At the end of the day, most individuals who are self-employed or own interests in partnerships, LLCs or S corporations will be paying less tax on their passthrough income than in the past.

We presented the following three scenarios to officials at the National Federation of Independent Business, in each case assuming a joint return and that other income does not trigger the high income phase out

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.A freelance writer whose only income is $120,000 of self-employment income reported on Schedule C.A consultant who establishes a single-member LLC and whose only income is $250,000 earned from a variety of clients and reported on Schedule C.

In each case, NFIB says the 20% deduction would apply.

26 ways the GOP's tax reform will affect your wallet
---------------------------------------------------------
So a self employed person who makes 35 grand on a joint return, gets to deduct 20% and pays taxes on the remaining??

They still get to claim 20%, I thought the law was only for those who paid a higher tax bracket.

( I'm glad they put a cap on it- it just does not seem fair that a person who works for others making the same income pays a higher tax.
They just assume a self employed person is going to have employees, not really the case - it should of also stated with ? no. of employees)

I think I may be reading this wrong.

 

[Penelope]

This is a dumb law and here is why.

Lowering the tax bracket for these self employed people , they will just pocket the money. When a small business hires people or spends any money on a business it gets to deduct it on schedule C so whatever the personal income is left is what gets taxed.

its like a wash. If they made the money they should pay taxes on it, if they made the money why didn't they hire workers before this wash of a tax cut.

 

[Penelope]

If you wanted Corps to pay less tax, let them have more write offs. A Corp (incorporated) is able to control exactly how much money they make. A corp is able to lower their taxes, an entity like a person, by spending money on workers , benefits etc. Too think anything is going to change is crazy.

 

[Penelope]

If you really think they are going to take this money , that they already make, and spend it on job creation due to paying lower taxes, is well crazy.

The job markets has been very strong for the last year for skilled workers.

 

[Toddsterpatriot]

The changes to the taxation of passthrough businesses are some of the most complex provisions in the new law, in part because of lots of limitations and antiabuse rules. They’re designed to help prevent gaming of the tax system by taxpayers trying to have income taxed at the lower passthrough rate rather than the higher individual income tax rate. For many pass-through businesses, for example, the 20% deduction mentioned above phases out for taxpayers with incomes in excess of $157,500 on an individual return and $315,000 on a joint return. At the end of the day, most individuals who are self-employed or own interests in partnerships, LLCs or S corporations will be paying less tax on their passthrough income than in the past.

We presented the following three scenarios to officials at the National Federation of Independent Business, in each case assuming a joint return and that other income does not trigger the high income phase out

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.A freelance writer whose only income is $120,000 of self-employment income reported on Schedule C.A consultant who establishes a single-member LLC and whose only income is $250,000 earned from a variety of clients and reported on Schedule C.

In each case, NFIB says the 20% deduction would apply.

26 ways the GOP's tax reform will affect your wallet
---------------------------------------------------------
So a self employed person who makes 35 grand on a joint return, gets to deduct 20% and pays taxes on the remaining??

They still get to claim 20%, I thought the law was only for those who paid a higher tax bracket.

( I'm glad they put a cap on it- it just does not seem fair that a person who works for others making the same income pays a higher tax.
They just assume a self employed person is going to have employees, not really the case - it should of also stated with ? no. of employees)

I think I may be reading this wrong.

So a self employed person who makes 35 grand on a joint return, gets to deduct 20% and pays taxes on the remaining??

Yes.

I thought the law was only for those who paid a higher tax bracket.

That's what happens when you rely on the media.

 

[Toddsterpatriot]

This is a dumb law and here is why.

Lowering the tax bracket for these self employed people , they will just pocket the money. When a small business hires people or spends any money on a business it gets to deduct it on schedule C so whatever the personal income is left is what gets taxed.

its like a wash. If they made the money they should pay taxes on it, if they made the money why didn't they hire workers before this wash of a tax cut.

Lowering the tax bracket for these self employed people , they will just pocket the money.

OMG!! They'll just pocket the money!!!

Why does that make it a dumb law?

When a small business hires people or spends any money on a business it gets to deduct it on schedule C so whatever the personal income is left is what gets taxed.​

​

its like a wash. ​

Why is it a wash?​

​

If they made the money they should pay taxes on it​

They do pay taxes on money they make. ​

​

if they made the money why didn't they hire workers before this wash of a tax cut.​

Some already did. Some didn't. Some will now. Some won't.
Why do any of these possibilities make it a bad law?​

 

[Toddsterpatriot]

If you wanted Corps to pay less tax, let them have more write offs. A Corp (incorporated) is able to control exactly how much money they make. A corp is able to lower their taxes, an entity like a person, by spending money on workers , benefits etc. Too think anything is going to change is crazy.

If you wanted Corps to pay less tax, let them have more write offs.

How about "writing off 20% of income before it is taxed"?

A Corp (incorporated) is able to control exactly how much money they make.

Is that why no corp has ever gone out of business, like, ever?

A corp is able to lower their taxes, an entity like a person, by spending money on workers , benefits etc.

Ok. So what?

Too think anything is going to change is crazy.

If I'm able to pay 20% less tax, maybe I'll go after extra clients? Maybe I'll plan on buying more equipment?

Why are those possible changes.....crazy?

 

[Toddsterpatriot]

If you really think they are going to take this money , that they already make, and spend it on job creation due to paying lower taxes, is well crazy.

The job markets has been very strong for the last year for skilled workers.

If you really think they are going to take this money , that they already make, and spend it on job creation due to paying lower taxes, is well crazy.

Maybe they'll take it and spend in on a nice vacation or a new car......why is that crazy?

The job markets has been very strong for the last year for skilled workers.

Maybe they need to raise wages to retain their skilled workers? Maybe this tax cut helps them do that?

 

[BulletProof]

As I understand, a rich self-employed person can declare part of their income to be profits, and pay the lower corporate rate and also avoid payroll taxes. These people are already claiming huge amounts of bogus deductions.

 

[Toddsterpatriot]

As I understand, a rich self-employed person can declare part of their income to be profits, and pay the lower corporate rate and also avoid payroll taxes. These people are already claiming huge amounts of bogus deductions.

As I understand, a rich self-employed person can declare part of their income to be profits, and pay the lower corporate rate and also avoid payroll taxes.

Anything over $127,200 this year has already maxed out Social Security.
The corporate rate was 35%, the top individual rate was 39.6%.
Not a giant difference.

These people are already claiming huge amounts of bogus deductions.

Like what?

 

[Penelope]

As I understand, a rich self-employed person can declare part of their income to be profits, and pay the lower corporate rate and also avoid payroll taxes. These people are already claiming huge amounts of bogus deductions.

Even one making 50 grand a year with no employees and filing a joint return can cut 20% off their income. There is a cap on pass through, INC are different, they are a like another invisible person that pay their CEO's , etc before they get taxed , and then the CEO uses tax havens. Nothing is going to change due to this tax cut except they will not need to hide as much money, and due to decrease regulations on businesses, they will do whatever they want and if they grow and hire new employees it will be to decrease regulations.

 

[Penelope]

If you wanted Corps to pay less tax, let them have more write offs. A Corp (incorporated) is able to control exactly how much money they make. A corp is able to lower their taxes, an entity like a person, by spending money on workers , benefits etc. Too think anything is going to change is crazy.

If you wanted Corps to pay less tax, let them have more write offs.

How about "writing off 20% of income before it is taxed"?

A Corp (incorporated) is able to control exactly how much money they make.

Is that why no corp has ever gone out of business, like, ever?

A corp is able to lower their taxes, an entity like a person, by spending money on workers , benefits etc.

Ok. So what?

Too think anything is going to change is crazy.

If I'm able to pay 20% less tax, maybe I'll go after extra clients? Maybe I'll plan on buying more equipment?

Why are those possible changes.....crazy?

No you would of done it already.

 

[usmbguest5318]

A fairly decent summary of how the pass-through deduction works is found here: What the tax reform bill means for individuals. An important aspect of pass-through income is how much of it is construed "profit" and how much is construed "salary." Profit is a return of capital; salary is a wage. It'd be naive to think that owners of closely held pass-through entities cannot adequately create a document trail so they can control what sums are reported under each classification. It's somewhat harder to get quite as "individualized" in very large pass-through organizations, but make no mistake, such firms and the partners tax planners will find ways to not "screw," i.e., maximize the tax minimization that is possible, their partners.

Just as money can pass-through the firm to the firm owners, so too can money pass-through the owner to the firm. There's little that the firm pays to a third party that doesn't become a business expense that's passed right back to the firm owner and becomes a pre-AGI deduction.


Another key thing to know is that the pass-through deduction is an itemized deduction (Schedule A). The thing is that as an owner of a pass-through entity, one is also self-employed, which means one also gets to reduce one's gross income by the business expenses one incurs at home (Schedule C or Schedule E, both of which "roll-up" before AGI, whereas Schedule A deductions are post-AGI deductions).

Those "C-" and "E-qualifying" expenses are not known to one's firm, so they don't appear on the "K-1" report one receives from one's firm. One must therefore maintain documentation that allows one to deduct whatever portion of them one is allowed. One's ability to deduct them is no different now than it was before the GOP tax bill became law.


What's one way to get a better charitable deduction, for example, than taking the Schedule A charitable deduction? Write a check and donate the money in the name of one's firm. That'll put the deduction on Schedule C/E rather than on Schedule A. I'll let you look into how charitable contributions by a business differ from those made by an individual.

 

[Penelope]

A fairly decent summary of how the pass-through deduction works is found here: What the tax reform bill means for individuals. An important aspect of pass-through income is how much of it is construed "profit" and how much is construed "salary." Profit is a return of capital; salary is a wage. It'd be naive to think that owners of closely held pass-through entities cannot adequately create a document trail so they can control what sums are reported under each classification. It's somewhat harder to get quite as "individualized" in very large pass-through organizations, but make no mistake, such firms and the partners tax planners will find ways to not "screw," i.e., maximize the tax minimization that is possible, their partners.

Just as money can pass-through the firm to the firm owners, so too can money pass-through the owner to the firm. There's little that the firm pays to a third party that doesn't become a business expense that's passed right back to the firm owner and becomes a pre-AGI deduction.


Another key thing to know is that the pass-through deduction is an itemized deduction (Schedule A). The thing is that as an owner of a pass-through entity, one is also self-employed, which means one also gets to reduce one's gross income by the business expenses one incurs at home (Schedule C or Schedule E, both of which "roll-up" before AGI, whereas Schedule A deductions are post-AGI deductions).

Those "C-" and "E-qualifying" expenses are not known to one's firm, so they don't appear on the "K-1" report one receives from one's firm. One must therefore maintain documentation that allows one to deduct whatever portion of them one is allowed. One's ability to deduct them is no different now than it was before the GOP tax bill became law.


What's one way to get a better charitable deduction, for example, than taking the Schedule A charitable deduction? Write a check and donate the money in the name of one's firm. That'll put the deduction on Schedule C/E rather than on Schedule A. I'll let you look into how charitable contributions by a business differ from those made by an individual.

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.

Wouldn't this person be allowed to declare all her income as wage, as it would not put her in a different tax bracket (guessing) and she is not making any profit off of return of capital and she has no employees?

Would she (as in the OP) still be allowed to deduct 20% off her gross income besides her expenses on schedule C?

 

[usmbguest5318]

A fairly decent summary of how the pass-through deduction works is found here: What the tax reform bill means for individuals. An important aspect of pass-through income is how much of it is construed "profit" and how much is construed "salary." Profit is a return of capital; salary is a wage. It'd be naive to think that owners of closely held pass-through entities cannot adequately create a document trail so they can control what sums are reported under each classification. It's somewhat harder to get quite as "individualized" in very large pass-through organizations, but make no mistake, such firms and the partners tax planners will find ways to not "screw," i.e., maximize the tax minimization that is possible, their partners.

Just as money can pass-through the firm to the firm owners, so too can money pass-through the owner to the firm. There's little that the firm pays to a third party that doesn't become a business expense that's passed right back to the firm owner and becomes a pre-AGI deduction.


Another key thing to know is that the pass-through deduction is an itemized deduction (Schedule A). The thing is that as an owner of a pass-through entity, one is also self-employed, which means one also gets to reduce one's gross income by the business expenses one incurs at home (Schedule C or Schedule E, both of which "roll-up" before AGI, whereas Schedule A deductions are post-AGI deductions).

Those "C-" and "E-qualifying" expenses are not known to one's firm, so they don't appear on the "K-1" report one receives from one's firm. One must therefore maintain documentation that allows one to deduct whatever portion of them one is allowed. One's ability to deduct them is no different now than it was before the GOP tax bill became law.


What's one way to get a better charitable deduction, for example, than taking the Schedule A charitable deduction? Write a check and donate the money in the name of one's firm. That'll put the deduction on Schedule C/E rather than on Schedule A. I'll let you look into how charitable contributions by a business differ from those made by an individual.

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.

Wouldn't this person be allowed to declare all her income as wage, as it would not put her in a different tax bracket (guessing) and she is not making any profit off of return of capital and she has no employees?

Would she (as in the OP) still be allowed to deduct 20% off her gross income besides her expenses on schedule C?

Would she (as in the OP) still be allowed to deduct 20% off her gross income besides her expenses on schedule C?

To the best of my knowledge, yes.

I have to caveat my response as I did because I'm not a tax accountant/attorney. What I know comes to me by what I've read on the IRS' site and what my own tax advisor tells me about my own situation/taxes. I'm simply not in a position to say what a specific taxpayer can or cannot do; that is best left to tax professionals. I can talk about what the code allows in a strategic sense, not a specific sense.

 

[yiostheoy]

The changes to the taxation of passthrough businesses are some of the most complex provisions in the new law, in part because of lots of limitations and antiabuse rules. They’re designed to help prevent gaming of the tax system by taxpayers trying to have income taxed at the lower passthrough rate rather than the higher individual income tax rate. For many pass-through businesses, for example, the 20% deduction mentioned above phases out for taxpayers with incomes in excess of $157,500 on an individual return and $315,000 on a joint return. At the end of the day, most individuals who are self-employed or own interests in partnerships, LLCs or S corporations will be paying less tax on their passthrough income than in the past.

We presented the following three scenarios to officials at the National Federation of Independent Business, in each case assuming a joint return and that other income does not trigger the high income phase out

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.A freelance writer whose only income is $120,000 of self-employment income reported on Schedule C.A consultant who establishes a single-member LLC and whose only income is $250,000 earned from a variety of clients and reported on Schedule C.

In each case, NFIB says the 20% deduction would apply.

26 ways the GOP's tax reform will affect your wallet
---------------------------------------------------------
So a self employed person who makes 35 grand on a joint return, gets to deduct 20% and pays taxes on the remaining??

They still get to claim 20%, I thought the law was only for those who paid a higher tax bracket.

( I'm glad they put a cap on it- it just does not seem fair that a person who works for others making the same income pays a higher tax.
They just assume a self employed person is going to have employees, not really the case - it should of also stated with ? no. of employees)

I think I may be reading this wrong.

The way pass-thru matters usually affect partners is that the first level of taxation occurs at the pass thru entity level, then the income and the tax passes thru to the partner as taxable income and a credit.

I have not read the new proposals yet because nobody else has either.

I'll wait on further literature on this in the coming weeks and months.

 

[Penelope]

A fairly decent summary of how the pass-through deduction works is found here: What the tax reform bill means for individuals. An important aspect of pass-through income is how much of it is construed "profit" and how much is construed "salary." Profit is a return of capital; salary is a wage. It'd be naive to think that owners of closely held pass-through entities cannot adequately create a document trail so they can control what sums are reported under each classification. It's somewhat harder to get quite as "individualized" in very large pass-through organizations, but make no mistake, such firms and the partners tax planners will find ways to not "screw," i.e., maximize the tax minimization that is possible, their partners.

Just as money can pass-through the firm to the firm owners, so too can money pass-through the owner to the firm. There's little that the firm pays to a third party that doesn't become a business expense that's passed right back to the firm owner and becomes a pre-AGI deduction.


Another key thing to know is that the pass-through deduction is an itemized deduction (Schedule A). The thing is that as an owner of a pass-through entity, one is also self-employed, which means one also gets to reduce one's gross income by the business expenses one incurs at home (Schedule C or Schedule E, both of which "roll-up" before AGI, whereas Schedule A deductions are post-AGI deductions).

Those "C-" and "E-qualifying" expenses are not known to one's firm, so they don't appear on the "K-1" report one receives from one's firm. One must therefore maintain documentation that allows one to deduct whatever portion of them one is allowed. One's ability to deduct them is no different now than it was before the GOP tax bill became law.


What's one way to get a better charitable deduction, for example, than taking the Schedule A charitable deduction? Write a check and donate the money in the name of one's firm. That'll put the deduction on Schedule C/E rather than on Schedule A. I'll let you look into how charitable contributions by a business differ from those made by an individual.

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.

Wouldn't this person be allowed to declare all her income as wage, as it would not put her in a different tax bracket (guessing) and she is not making any profit off of return of capital and she has no employees?

Would she (as in the OP) still be allowed to deduct 20% off her gross income besides her expenses on schedule C?

Would she (as in the OP) still be allowed to deduct 20% off her gross income besides her expenses on schedule C?

To the best of my knowledge, yes.

I have to caveat my response as I did because I'm not a tax accountant/attorney. What I know comes to me by what I've read on the IRS' site and what my own tax advisor tells me about my own situation/taxes. I'm simply not in a position to say what a specific taxpayer can or cannot do; that is best left to tax professionals. I can talk about what the code allows in a strategic sense, not a specific sense.

So one just gets to just lower their income due to this loophole. Unreal. I may need to go to the accountant for 2018, because this does not sound right. As you know businesses (any size) are always doing tax planning.

 

[Penelope]

The changes to the taxation of passthrough businesses are some of the most complex provisions in the new law, in part because of lots of limitations and antiabuse rules. They’re designed to help prevent gaming of the tax system by taxpayers trying to have income taxed at the lower passthrough rate rather than the higher individual income tax rate. For many pass-through businesses, for example, the 20% deduction mentioned above phases out for taxpayers with incomes in excess of $157,500 on an individual return and $315,000 on a joint return. At the end of the day, most individuals who are self-employed or own interests in partnerships, LLCs or S corporations will be paying less tax on their passthrough income than in the past.

We presented the following three scenarios to officials at the National Federation of Independent Business, in each case assuming a joint return and that other income does not trigger the high income phase out

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.A freelance writer whose only income is $120,000 of self-employment income reported on Schedule C.A consultant who establishes a single-member LLC and whose only income is $250,000 earned from a variety of clients and reported on Schedule C.

In each case, NFIB says the 20% deduction would apply.

26 ways the GOP's tax reform will affect your wallet
---------------------------------------------------------
So a self employed person who makes 35 grand on a joint return, gets to deduct 20% and pays taxes on the remaining??

They still get to claim 20%, I thought the law was only for those who paid a higher tax bracket.

( I'm glad they put a cap on it- it just does not seem fair that a person who works for others making the same income pays a higher tax.
They just assume a self employed person is going to have employees, not really the case - it should of also stated with ? no. of employees)

I think I may be reading this wrong.

The way pass-thru matters usually affect partners is that the first level of taxation occurs at the pass thru entity level, then the income and the tax passes thru to the partner as taxable income and a credit.

I have not read the new proposals yet because nobody else has either.

I'll wait on further literature on this in the coming weeks and months.

Yes but now they are making anyone who does a schedule C a pass through. We can view schedule C as a person.

 

[Skull Pilot]

The changes to the taxation of passthrough businesses are some of the most complex provisions in the new law, in part because of lots of limitations and antiabuse rules. They’re designed to help prevent gaming of the tax system by taxpayers trying to have income taxed at the lower passthrough rate rather than the higher individual income tax rate. For many pass-through businesses, for example, the 20% deduction mentioned above phases out for taxpayers with incomes in excess of $157,500 on an individual return and $315,000 on a joint return. At the end of the day, most individuals who are self-employed or own interests in partnerships, LLCs or S corporations will be paying less tax on their passthrough income than in the past.

We presented the following three scenarios to officials at the National Federation of Independent Business, in each case assuming a joint return and that other income does not trigger the high income phase out

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.A freelance writer whose only income is $120,000 of self-employment income reported on Schedule C.A consultant who establishes a single-member LLC and whose only income is $250,000 earned from a variety of clients and reported on Schedule C.

In each case, NFIB says the 20% deduction would apply.

26 ways the GOP's tax reform will affect your wallet
---------------------------------------------------------
So a self employed person who makes 35 grand on a joint return, gets to deduct 20% and pays taxes on the remaining??

They still get to claim 20%, I thought the law was only for those who paid a higher tax bracket.

( I'm glad they put a cap on it- it just does not seem fair that a person who works for others making the same income pays a higher tax.
They just assume a self employed person is going to have employees, not really the case - it should of also stated with ? no. of employees)

I think I may be reading this wrong.

SO what?

There has been endless whining that this tax bill doesn't help out the middle class enough. This is a huge benefit for small businesses and self employed people you know the middle class.

 

[usmbguest5318]

A fairly decent summary of how the pass-through deduction works is found here: What the tax reform bill means for individuals. An important aspect of pass-through income is how much of it is construed "profit" and how much is construed "salary." Profit is a return of capital; salary is a wage. It'd be naive to think that owners of closely held pass-through entities cannot adequately create a document trail so they can control what sums are reported under each classification. It's somewhat harder to get quite as "individualized" in very large pass-through organizations, but make no mistake, such firms and the partners tax planners will find ways to not "screw," i.e., maximize the tax minimization that is possible, their partners.

Just as money can pass-through the firm to the firm owners, so too can money pass-through the owner to the firm. There's little that the firm pays to a third party that doesn't become a business expense that's passed right back to the firm owner and becomes a pre-AGI deduction.


Another key thing to know is that the pass-through deduction is an itemized deduction (Schedule A). The thing is that as an owner of a pass-through entity, one is also self-employed, which means one also gets to reduce one's gross income by the business expenses one incurs at home (Schedule C or Schedule E, both of which "roll-up" before AGI, whereas Schedule A deductions are post-AGI deductions).

Those "C-" and "E-qualifying" expenses are not known to one's firm, so they don't appear on the "K-1" report one receives from one's firm. One must therefore maintain documentation that allows one to deduct whatever portion of them one is allowed. One's ability to deduct them is no different now than it was before the GOP tax bill became law.


What's one way to get a better charitable deduction, for example, than taking the Schedule A charitable deduction? Write a check and donate the money in the name of one's firm. That'll put the deduction on Schedule C/E rather than on Schedule A. I'll let you look into how charitable contributions by a business differ from those made by an individual.

A yoga instructor whose only income is $35,000 of self-employment reported on Schedule C.

Wouldn't this person be allowed to declare all her income as wage, as it would not put her in a different tax bracket (guessing) and she is not making any profit off of return of capital and she has no employees?

Would she (as in the OP) still be allowed to deduct 20% off her gross income besides her expenses on schedule C?

Would she (as in the OP) still be allowed to deduct 20% off her gross income besides her expenses on schedule C?

To the best of my knowledge, yes.

I have to caveat my response as I did because I'm not a tax accountant/attorney. What I know comes to me by what I've read on the IRS' site and what my own tax advisor tells me about my own situation/taxes. I'm simply not in a position to say what a specific taxpayer can or cannot do; that is best left to tax professionals. I can talk about what the code allows in a strategic sense, not a specific sense.

So one just gets to just lower their income due to this loophole. Unreal. I may need to go to the accountant for 2018, because this does not sound right. As you know businesses (any size) are always doing tax planning.

So one just gets to just lower their income due to this loophole. Unreal.

??? What? Lowering one's income is what every deduction does. Credits are the only things that directly reduce one's tax liability.

Gross income (income from all sources)
Less: "Above the line" deductions (aka pre-AGI deductions)
Adjusted gross income (AGI)
Less: the greater of the standard deduction or the sum of allowed itemized deductions
Taxable income
Times: applicable tax rate
Provisional income tax
Less: allowed tax credits
Gross tax liability for the tax year
Less: taxes paid during the tax year
Current income tax liability -- This sum is what one must pay, usually no later than April 15th.​