[Anonymous]

Im on my 4th attempt at FAR (sigh – shoulda done this before kids, and on years where NASBA wasn’t going to delay test scores, etc.)…

anyways, I STILL continue to confuse myself with what “Income Tax Expense” truly represents. Is it the plug after calculating your current and deferred tax assets/liabilities? or is it simply the “Book” income (from the income statement) multiplied by the current tax rate? or is it that taxable income (from tax statement) times current tax rate?

i have a headache

[Adam]

Income tax expense is the current enacted rate by congress for the current year multiplied by your taxable income..its pretty straight forward lol don't over think things.

Further:
A Deferred asset is when Taxable income is greater then Book. (You're paying more tax now so in a sense prepaying tax)
A Deferred Liability is when Book is Greater then Taxable. (Your true tax is now deferred due to accounting tricks/methods and you will eventually owe what the deferred amount is in the future)

Hope that helps.

Adam

[Anonymous]

Thanks Adam – so essentially “net income” from the financial statements is irrlevant, aside from a starting point to figure out taxable income?

[oldercandidate21]

Tax expense on the income statement is both Current and Deferred Tax.

FAR - 75 November 2015
REG - 69 April 2016 (WTH? Test I got isn't what I studied for)
BEC - 81 June 2016
AUD - TBD

[okcpa2015]

1.You would calculate your current tax liability and record that as a credit at the effective rate for that period.

2.Record deferred tax liabilities and record a credit at the enacted rate for the period you expect the liability to occur.

3. Calculate your deferred tax assets at the enacted rate for the period you expect the asset (asset = read future economic benefit) to occur. Review the deferred tax assets for net realizable value and write down if appropriate (like any other asset). Record a debit for the DTA.

4. To balance the equation record tax expense.

December 31, 2017 is a strange date for tax accruals for corporations because your recording your current tax liability at a 35% rate and your deferred items at a 21% rate because the tax bill was signed into law before the end of 2017.

FAR - 91
REG - 88
AUD - 98
BEC - 88

[Adam]

Its not irrelevant per say, but yes use it as a starting point to get to taxable income after your adjustments.

You will need it to calculate the deferrals though, but as far as getting the actual taxable income part use it as a base starting point.

If you pull up Roger's CPA class on this he explains it fairly well and easy.

[Author]

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