tax accounting asc 740 tax provision accounting

ASC 740 Tax Provision Accounting

For businesses with multiple entities, tax accounting (ASC 740) is not only a financial reporting requirement but also essential for making informed tax decisions. At CKH Group, we can assist your organization in this complicated calculation and reconciliation, helping you navigate the complexities of the ASC 740 tax provision.

As a leading CPA firm based in Atlanta, we take pride in offering Tax Accounting Services designed to:

    • Ensure a quick turnaround of tax provisions
    • Ease the burden of performing return to provision reconciliations
    • Identify the tax impacts of business combinations

What Is ASC 740 Tax Accounting?

The ASC 740 income tax provision provides guidelines on how companies should account for and report the effects of taxes based on income. This ensures that financial statements reflect the proper amount of current and deferred income taxes, thus providing a clearer picture of a company’s tax position to investors and other stakeholders. This applies to all entities but only to entity-level taxes, which means calculating the ASC 740 provision for income taxes usually only concerns C-corporations.

CKH Group can provide support to any size entity through the following:

  • Tax provision preparation
  • Reconciliation between tax provision and return
  • Calculation and reconciliation of current and deferred tax balances

How to Calculate ASC 740 Tax Provision

The calculation for ASC 740 is notoriously difficult, specifically because it has to take into account each state’s tax laws and regulations as well as your particular tax situation. In general, the calculation requires adding the current and deferred income tax provisions. You must first calculate each of these items though before adding them.

How Does ASC 740 Apply to State Income Taxes?

State income taxes are accounted for under ASC 740 by recognizing state income tax liability, which influences the current federal income taxes payable since state income taxes are deductible for federal income tax purposes. Deferred taxes are calculated at a combined federal and state rate, net of the federal benefit from the deduction of state taxes.

The reason why it is so complicated to calculate income tax provision under ASC 740 is because it is so heavily involved in state income taxes, which vary from state to state and require an expert level of understanding of each state’s tax laws in conjunction with federal laws that govern deduction for state income taxes.

Kateryna Kudrenko

Why Choose CKH Group?

CKH Group’s Tax Services are designed to unlock your tax potential and secure your financial well-being.

With CKH Group, you’re not just getting a CPA firm; you’re gaining a trusted partner committed to your success. Discover the CKH Group advantage, where excellence, integrity, and expertise come together to create a powerful tax partnership for you. Contact us today to explore how our Tax Services can add value to your organization.

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