In the multiple dataset approach, you enter the Return to Provision true-up adjustments for prior periods in a separate dataset. The true-up dataset has the current year's activity in another dataset. The reporting dataset will have the total current provision. There are pros and cons to this approach.

 

Pros

•The system automatically calculates the current expense.

•The amount is recalculated if items change.

•Permanent adjustments flow from federal to state. Therefore, the state current expense is automatically calculated.

•Information is isolated from the current year provision.

•Adjustments to temporary differences do not display in the effective rate report.

 

Cons

•There are multiple datasets that need to be managed, including appropriate tax rates.

•Deferred tax assets/liabilities balances need to be migrated from the true-up dataset. If not, balances will be in two different datasets. Balances can be merged using the dataset combine feature when creating a new dataset.

•To view reports for the current year provision, be sure you are looking at the appropriate dataset(s). The dataset view needs to be adjusted to view the separate true-up dataset, the current year's provision dataset, and the reporting dataset with the total current year's data.

Note: Each true-up item needs to be entered in a dataset.

 

Permanent Differences and Tax Adjustments

•The true-up for these items should impact the current tax expense and the taxes payable. This can be achieved by entering the permanent true-up amount as a permanent difference with an R tag and tax adjustments.

•The impact to the current tax expense is computed based on statutory rates.

 

Temporary and After Tax Temporary Differences

•The true-up for these items should impact the deferred and current tax expense, the deferred tax asset/liability and the taxes payable.

•The current and deferred tax expense, deferred tax asset/liability and taxes payable true-up can be achieved by entering the true-up amount as activity with an R tag.

•The impact to the current and deferred tax expense is computed based on statutory rates.

 

Net Operating Losses

If the true up is a year in which the provision was in a Net Operating Loss position, the NOL should be offset, instead of the taxes payable account.