How to record DTA for state tax payment timing
Recognition of a deferred tax asset arising from state income taxes that are accrued for book purposes but only deductible for federal tax purposes when paid.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Deferred Tax Asset - Federal | Asset | 2,100.00 | - |
| Deferred Tax Benefit - Federal | Revenue | - | 2,100.00 |
💡 Accountant's Note
State income taxes are generally deductible for US federal income tax purposes on a cash basis. If a company accrues state tax expense in Year 1 but pays it in Year 2, it creates a temporary difference resulting in a federal deferred tax asset.
Practitioner & Systems Framework
💻 ERP Architecture
Automate through the tax provision module by linking state tax accrual accounts to federal tax sensitive categories.
⚠️ Audit Flags
Discrepancies between the state tax provision and the federal deduction taken on Form 1120.
📄 Required Documentation
State tax returns, proof of payment, and federal tax workpapers showing the add-back and subsequent deduction.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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