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: What is the difference between paid and accrued method for declaring foreign taxes paid? Trying to do my 1116.
In: Economics
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: What is the difference between paid and accrued method for declaring foreign taxes paid? Trying to do my 1116.
If you think about U.S. federal taxes, you *accrue* tax liability as you earn money, but you might *pay* it across different years. For example, your 2018 tax liability was entirely accrued in 2018. You probably paid some of it in 2018 through withholding from your paychecks, but you might also have had an extra amount due in 2019 which you paid then. The accrual method of accounting means you can choose to count all of it for 2018. Cash accounting means you spit it up by when you actually paid.