Income Tax Provisions

Income Tax Provisions

Income Tax Provision (ASC 740) (Accounting for Income Taxes) Preparation and Review Services

Calculating the provision for income taxes is one of the most time-consuming and potentially risky tasks that companies face. If you don’t understand how to calculate corporate income tax provisions, you may make costly mistakes.

Even if you’ve made ASC 740 calculations in the past to determine your income tax provision, the tax law changes in 2017 have further complicated matters. And you are still required to adhere to Generally Accepted Accounting Principles (GAAP) in the US and International Financial Reporting Standards if your company does business outside of the US.

The provision for income taxes calculation is critical to responsible financial management and reporting. Companies that get it wrong may struggle with financial control or be forced to issue a financial statement restatement – an embarrassing situation that nobody wants to face.

ASC 740 Accounting of the Provision for Income Taxes

GAAP requires companies to account for the provision for income taxes using the asset/liability method. The income tax provision formula takes:

  • The amount of income taxes currently payable or refundable
  • Plus or minus the change in aggregate deferred tax assets and liabilities

This method focuses on the balance sheet and calculates your deferred income tax expense based on changes to your deferred tax assets and liabilities.

While it’s possible for a CFO or company accountant to calculate the provision for income taxes, the process is complicated and time consuming. That’s where we come in.

Cook, Martin, Poulson has been doing our taxes since 2005. They have never missed a beat. The advice they have given us through the years has saved us 10’s of thousands of dollars. Whenever I have called them for tax advice throughout the year, they have always responded quickly with exactly the information I have needed to make important decisions. This year, due to their diligence and meticulous attention to detail over the past eight years, they were able to use an investment loss that I had forgotten about. This changed what we thought was going to be a substantial ‘amount owed’ this year into a refund. We love these guys!

Randy Bliss

How We Can Help

At Cook Martin Poulson, we have the know-how and experience to simplify the income tax provision calculation process for you. Our expertise will allow you to:

  • Focus on the important task of running and growing your business
  • Put your income tax provisioning in the hands of experts
  • Prepare for your IPO (your auditor cannot handle your provision for income taxes if you are pre-IPO)

Cook Martin is a client-focused accounting firm. We build long-term relationships with our clients without any of the bureaucracy that can take over at bigger accounting firms. We care about your business and we’re here to help you simplify the provision for income taxes.

Cook Martin’s Accounting for Income Tax Service

Accounting for income tax is a specialty service that blends accounting and tax preparation. While very large companies might have an in-house team capable of handling the complex accounting for the provision for income taxes, others may struggle to:

  • Understand the complex calculations necessary for ASC 740 compliance
  • Make accurate calculations
  • Adhere to regulatory and reporting requirements
  • Properly account for the income tax provision on financial statements

Cook Martin Poulson can help. We have an in-house expert with a deep understanding of accounting for income tax. Our specialized accounting for income tax provision services include:

Income Tax Provision Preparation

We’ll meet with your in-house team to make sure we understand your business, taking the time to identify tax opportunities and risks based on what we learn.

From there, we’ll build the income tax provision model for your company. During the income tax provision process, we will:

  • Build an income tax provision for each applicable taxing jurisdiction worldwide.
  • Review your provision to tax return differences and record their impact.
  • Review your accounting data for income tax and GAAP differences.
  • Build a rate reconciliation to support the integrity of the provision we create and to calculate the effective tax rate of your company.
  • Provide necessary journal entries to record the impact of the income tax provision.
  • Summarize the impacts of the provision to support your financial statement footnote reporting.
  • Update the provision model as needed to reflect any changes to GAAP reporting or income tax laws
  • Prepare calculations to support valuation allowances and releases of valuation allowances.

We use the preparation phase to ensure proper compliance and set up mechanisms that will streamline the provision for income taxes in the future.

Income Tax Provision Review

After the preparation phase, we will meet with your team again to explain what we learned during the preparation and gather additional information to help us evaluate your tax opportunities and risks.

Then, we’ll review the income tax provision model we created. In the income tax provision process, we will:

  • Review the income tax provision for each taxing jurisdiction.
  • Review the provision to tax return differences to confirm our estimates and eliminate errors.
  • Review your accounting data to identify any income tax or GAAP differences that may have been missed in the provision phase.
  • Review the rate reconciliation to verify the integrity of the provision model.
  • Review your journal entries to verify the integrity of the provision model.

Cook Martin’s income tax provision review process is designed to ensure the accuracy and integrity of your reporting and minimize your risks.

Income Tax Controls

The final step is to review your income tax processes with your team. In our walk-through, we will explain the risks and opportunities we have identified. We’ll also provide guidance to help you improve your control environment moving forward.

During the control process, we will:

  • Review the income tax provision processes
  • Provide memos and documentation as needed
  • Review income tax qualifications
  • Review tax and reporting compliance requirements

The control process will help you to implement proper reporting and internal controls to ensure income tax provision compliance.

Why use an outside firm to calculate the Income Tax Provision

In the end when you are presenting your Income Tax Provision (ASC 740) disclosure on your audited financial statements you will have the confidence it is done correctly.  You will have the experts and Cook Martin Poulson to answer the questions raised by the auditors and avoid the cost of time and money correcting the Income Tax Provision disclosure.

Learn More About Our Income Tax Provision Services

Our income tax provision experts can help you with ASC 740 accounting for income taxes, including preparation, review, and control services. Talk to our team today by calling (435) 750-5566 (Logan, UT) or (801) 467-4450 (Salt Lake City, UT).

Income Tax Provisions Advisors:

Erick Hatch
Erik Hatch
Location: Salt Lake City
Phone: (801) 467-4450
Fax: (801) 364-4603

Learn More About Erik Hatch


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