Legal Definitions - tax liability

Tax liability refers to the total amount of money an individual, business, or other entity is legally obligated to pay to a government authority in taxes.

Here are some examples to illustrate this concept:

• Income Tax for an Individual: After calculating all her earnings, deductions, and credits for the year, Maria, a software engineer, determines that she owes $12,500 to the federal government in income tax. This $12,500 is her personal income tax liability. It represents the specific sum she is legally required to pay based on her annual earnings.

• Property Tax for Homeowners: The city council sends an annual notice to the Chen family, stating that their residential property is assessed at a certain value, and based on the local tax rate, they owe $4,800 in property taxes for the upcoming year. This $4,800 is the Chen family's property tax liability, which is their legal obligation to pay taxes on the real estate they own.

• Sales Tax for a Business: "The Daily Grind," a local coffee shop, collected $1,500 in sales tax from its customers over the past month. The business is legally required to remit this collected amount to the state government. This $1,500 constitutes The Daily Grind's sales tax liability for that period, as it is the precise sum the business must pay to the state.