Tax accounting is a structure of accounting methods focused on taxes rather than the appearance of public financial statements. In short, tax accounting is the means of accounting for tax purposes.

Tax accounting is governed by the Internal Revenue Code, which dictates the specific rules that companies and individuals must follow when preparing their tax returns. Tax accounting applies to everyone—individuals, businesses, corporations, and other entities. Even those who are exempt from paying taxes must participate in tax accounting. The purpose of tax accounting is to be able to track funds (funds coming in as well as funds going out) associated with individuals and entities.