Statutory-to-tax adjustments
Statutory tax adjustments are only needed when you import the NAIC Annual Statement, which happens automatically.
You don't need to make statutory-to-tax adjustments when you manually enter Insurance information because tax adjustment balances are what's entered into the Organizer. These statutory adjustments are only for Annual Statement users only.
Automated Statutory-to-Tax Adjustments: Ensuring Tax Compliance
Due to inherent differences between
statutory
(Annual Statement) and accrual
(tax) accounting, specific adjustments are required when preparing federal and state tax returns.Fortunately, when your Annual Statement data is transferred, these essential statutory-to-tax adjustments are made automatically. This process ensures your financial figures align with tax regulations.
What These Adjustments Do
Statutory-to-tax adjustments modify the transferred Annual Statement balances. Their purpose is to accurately calculate the net taxable income for your federal return. Conceptually, this is similar to the adjustments made to book income for standard domestic corporations. For instance, a common adjustment addresses variations between depreciation reported for financial purposes versus depreciation calculated for tax purposes.
Other adjustments that need to take place for the taxable income computation include:
- Tax-exempt interest
- Change in due and accrued dividends
- Change in deferred and uncollected premiums
- Change in deposit type contracts
- Premium amortization
- Capital gains
- Elimination of change in loading
- Elimination of home office rent
- Elimination of NAIC amortization
- Elimination of NAIC depreciation
- Elimination of market discount accrual
- Difference in collected and earned real estate
- Interest on encumbrances
- Increase in loading on deferred & uncollected premiums
- Investment expenses.
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NAIC Annual Statement transfer for insurance returns
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