What is considered prepaid taxes? Is it the estimates you pay in for a year? For example, we made some estimates in 2009, is this considered prepaid taxes or tax expenses?

A prepaid tax would be if you paid it in a period earlier than when the expense is incurred. It doesn't work anything like a typical "prepaid" account because you won't go around paying the IRS up front like you would your insurance company. (More on that in a sec.) Do keep in mind that when a tax return is due is not the same as when you incurred the expenses, so book-wise you aren't "prepaying" anything.

What you made as estimated payments should have been charged off to the expense immediately. At the end of the year, you'll have one more estimated payment due, plus anything that might get leftover to go with the return, which all gets charged to the expense and put into a payable. (I'm assuming you're not going to pay it until 2010.) This is all charged off to expenses because the expense is within the same year. You're recording 2009 expenses.

"Prepaid" taxes aren't called that. They're a deferred tax liability. The term "tax liability" doesn't mean what people generally think it does, so it can be an asset if it was paid ahead of time, and by "ahead of time" I mean future years, not your estimated payments. But taxes are only paid ahead of time if you have differences between your book tax and your taxable income. That is an entirely different subject. It's not what you're referring to cause you're just talking about estimated payments, but it might be something you have to deal with.

I don't want to go into detail on that subject, partly because there isn't any way for anyone here to know what may exist in your situation, and partly cause I'm assuming someone else is doing the taxes. I don't know who. If it's a CPA, they can give you the entries you need to make to take care of those issues.

4/01 prepaid property taxes are $ 1594.78
Bank $ 1594.78
Paid six months property taxes for the period 4/1 through 10/31

Help? Compute the adjustment necessary for property taxes expense for the month of may