In the single dataset approach, you enter the Return to Provision true-up adjustments for Prior Periods in the Current Period’s Dataset. There are pros and cons to this approach.

 

Pros

•You need a minimal amount of information.

•You have all information in the same dataset.

 

Cons

•Adjustments to temporary differences appear in the effective tax rate report twice netting to zero.

•The true-up to the current tax expense requires that the tax adjustment you calculate the tax adjustment manually to ensure the correct current tax rate is used.

•The state deferred expense is trued up, but state tax adjustments are not.

•If there is a change in the deferred rates for prior years, the true-up includes the impact of the true-up and the change in rate.

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

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Permanent Differences and Tax Adjustments

The true-up for these items impact the current tax expense and the taxes payable. You achieve this by entering the true-up as a tax adjustment code starting with NC_, so that results are represented after the cash provision total.

 

Temporary and After Tax Temporary Differences

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

•The current tax expense and taxes payable true-up can be achieved by entering the true-up as a tax adjustment code starting with NC_, so that the results are represented after the cash provision total.

•The deferred tax expense and deferred tax asset/liability true-up can be achieved by entering the true-up as a deferred only temporary difference.

 

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.