Legal Definitions - tax assessment

A tax assessment is the official process by which a government tax authority determines the amount of tax an individual, business, or property owes. This determination can involve valuing assets, calculating income, or reviewing financial records to arrive at a final tax liability. It's a formal step that establishes the legal obligation to pay a specific amount of tax.

• Example 1: Property Tax

  After a local county government re-evaluates property values in a neighborhood, a homeowner receives a notice stating that their house has been assessed at a new value, resulting in a specific amount of property tax due for the upcoming year. This notice represents the county's official tax assessment of the property's value and the homeowner's resulting tax obligation.

• Example 2: Income Tax Audit

  Following an audit of a small business's tax returns, the Internal Revenue Service (IRS) sends the business owner a letter detailing additional income tax owed, along with interest and penalties, based on discrepancies found in their financial records. This letter from the IRS is a formal tax assessment, notifying the business of the government's determination of its revised income tax liability.

• Example 3: Sales Tax for a Retailer

  A state's Department of Revenue conducts an audit of a clothing boutique and discovers that the store underreported its taxable sales for the previous two years. The department then issues a formal document specifying the exact amount of additional sales tax, plus interest and penalties, that the boutique must pay. This document serves as the state's tax assessment, officially calculating and demanding the previously unpaid sales tax.