This video shows how to calculate the cash paid for income taxes for the operating section of the Statement of Cash Flows when it is prepared using the direct method.

You obtain the cash paid for income taxes by converting the income tax expense from the Income Statement to a cash-basis. This is done using the following formula:

Cash Paid for Income Taxes = Income Tax Expense + Decrease in Income Tax Payable – Increase in Income Tax Payable + Decrease in Deferred Tax Liabilities – Increase in Deferred Tax Liabilities + Increase in Deferred Tax Assets – Decrease in Deferred Tax Assets