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Current and Deferred Income Taxes

This template computes a company's federal income tax provision for financial reporting following SFAS No. 109, Accounting for Income Taxes. The template makes two calculations: one for the deferred provision and another for the current provision. This template has been enhanced to accommodate GAAP for uncertainty in income taxes introduced by FASB ASC 740,
Income Taxes
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Entering Data

All of the data needed to compute the tax provisions is entered on the Input worksheet as follows:
Beginning of year information
The beginning of the year taxable and deductible temporary differences amounts are used to determine the change in temporary differences during the period. Likewise, adjustments to the beginning of the year taxable and temporary differences for tax positions that failed either the more likely than not (MLTN) recognition or measurement criteria of FASB ASC 740 are used to determine the change in temporary differences actually recognized on the financial statements. All of these inputs are then used in the current tax provision to convert financial statement pretax income (loss) to taxable income. [For tax positions that failed either the more likely than not (MLTN) recognition or measurement criteria of FASB ASC 740 and have been recognized in a tax return filed in the current year or in a previous year, the related temporary differences should not be recognized in the financial statements, but rather, recorded as a liability for unrecognized tax benefits.] The beginning-of-year unrecognized tax benefit liabilities are used to compute the change in the liability amount, which is used in to calculate the current tax provision for the current year.  The amount of deferred tax assets and liabilities at the beginning of the year are used to compute the period's deferred tax expense or benefit.
While the tax effects of beginning of the year loss carryforwards should be considered in the beginning deferred tax asset amount, they should not be included in the beginning of the year deductible temporary differences amount. (Only deductible temporary differences, prior to applying the expected tax rate, should be included in the deductible temporary differences amount.)
Also, enter the beginning deferred tax liability and deferred tax asset valuation allowance amounts as positive numbers even though they are credit balances.
Expected future tax rate
Enter the currently enacted tax rate that is expected to apply when temporary differences reverse and loss carryforwards are realized.
Current tax provision information
The current tax provision is determined by converting financial statement pretax income (loss) to taxable income (or tax loss) and applying current federal tax rates to that amount. While most of the information needed in that calculation is derived from amounts entered in other areas of the Input worksheet, certain information, such as financial statement pretax income (loss) and the tax benefits of carrybacks, is not and must be entered in this section. When entering amounts in this section, enter all amounts other than a financial statement pretax loss as positive numbers.
Temporary differences
Temporary differences are differences between the bases of assets and liabilities for financial statement reporting and their tax bases. Enter a description of each difference in the first column and the amount of the difference in the second or third column, depending on whether the asset or liability's financial basis is greater than or less than its tax basis.
The template expects all assets to have debit balances and all liabilities to have credit balances. Thus, if an asset contra account such as accumulated depreciation has a higher credit balance for financial reporting than tax reporting, the template considers its basis for financial reporting to be lower than its basis for tax reporting (because negative numbers become lower as their absolute values increase). Similarly, the template considers a liability contract account with a higher debit balance for financial reporting than tax reporting to have a financial basis that is lower than its tax basis.
Space is provided to enter the amount of any taxable or temporary differences resulting from tax positions (or portions thereof) that fail either the FASB ASC 740 MLTN recognition or measurement criterion. Do not enter the liability for unrecognized tax benefits, but rather the amount of the underlying tax basis adjustments.
Permanent differences
The term "permanent difference" refers to amounts that have no tax consequences, such as nondeductible expenses. Amounts entered in this section are used in the current tax calculation to adjust financial statement pretax income (loss) to taxable income (or tax loss).
Amounts and expiration dates of loss carryforwards
Enter loss carryforwards for tax purposes that were available at the beginning of the year, loss carryforwards generated or used during the current year, and the expiration dates of any loss carryforwards available at the end of the year.
Note that the template automatically enters any operating loss generated in the current year based on amounts calculated on the Current Tax Provision worksheet. If the calculated amount is incorrect, simply override it by entering the correct amount in the cell.
The Amount Used in Current Year column should include all losses used in the current year, regardless of whether they were generated in the current period and carried back to offset income of prior years or created in a prior period and used to offset current-period income. Otherwise, current amounts and deferred tax provision amounts may not compute properly.
Space is provided near the bottom of this section to enter the amount of any loss carryforwards, if any, resulting from tax positions (or portions thereof) that fail either the FASB ASC 740 MLTN recognition or measurement criterion. Amounts should be entered as a negative number.
Also, remember to enter an amount in the cell titled "Carryforwards expected to be used next year," which appears at the bottom of the section. This amount is needed to determine how much of the carryforwards result in current and noncurrent deferred tax assets.
Amounts and expiration dates of tax credit carryforwards
Enter any tax credit carryforwards available at the beginning of the year, tax credit carryforwards generated or used during the current year, and the expiration dates of any tax credit carryforwards available at the end of the year. Space is provided near the bottom of this section to enter the amount of any tax credit carryforwards, if any, resulting from tax positions (or portions thereof) that fail either the FASB ASC 740 MLTN recognition or measurement criterion. Amounts should be entered as a negative number. Remember to enter an amount in the cell titled "Carryforwards expected to be used next year." That amount is used to determine how much of the carryforwards result in current deferred tax assets.
End of year deferred tax asset valuation allowance
After all other information has been entered on the Input worksheet, select the Deferred Tax Provision worksheet, view the calculated deferred tax asset, and assess the likelihood of its realization. If the probability of realizing the deferred tax asset is 50 percent or less, enter the amount of the deferred tax asset that is not likely to be realized on the Input worksheet.
Analysis of income taxes receivable (payable)
Amounts entered in the Adjustment of Beginning of Year Amount column are included in the current tax provision calculation as an adjustment of current income tax expense or benefit. The remaining information in this section is included to provide a record of the activity in the income tax receivable (payable) account. Enter beginning of the year amounts, refunds received, payments made, adjustments of beginning of year amounts (for example, as a result of settlements with the IRS), and the current period benefit or expense. (Note that debits in this section should be entered as positive numbers and credits should be entered as negative numbers.)

Completing the Calculations

After completing the Input worksheet, click the Update calculations button to compute the current and deferred provisions.

Calculating State Income Taxes

While the template has been designed primarily to compute federal current and deferred tax provisions, it can also be used to compute tax provisions for other jurisdictions. If temporary differences and carryforwards are the same for all jurisdictions, simply enter a combined tax rate, adjusted to reflect the interaction of taxes deductible for federal income tax reporting, in the Expected Future Tax Rate cell of the Input worksheet. The adjusted combined rate can be determined by the following formula:
combined rate = [federal tax rate × (100% _ state tax rate)] + state tax rate
If temporary differences or carryforwards are not the same for all jurisdictions, however, a combined rate should not be used. Instead, complete the template separately for each jurisdiction.
The current period expense or benefit amount calculated automatically on the Current Tax Provision worksheet is based on current federal tax rates. Consequently, if the template is used to compute state or local income taxes, the current expense or benefit amount will need to be computed manually and entered in the "Taxes on current period income based on federal tax rate schedule" cell of the Current Tax Provision worksheet.
Note: It is not necessary to change the current benefit (expense) amount appearing on the Analysis of Income Taxes Receivable (Payable) section of the Input worksheet. That amount is derived from the amount that appears on the Current Tax Provision worksheet.