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Business Tax Services

Accounting for Income Taxes

A skilled income tax provision approach

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It is challenging, but important, to provide accurate accounting for income tax liabilities within financial statements. The Smith + Howard tax team has the technical tax and accounting acumen needed to apply the guidance of ASC 740 in a way that ensures the tax components of your business are reflected properly in your financial statements.

Our tax provision team will expertly and accurately calculate and convey your company’s income taxes in a financial reporting period and will work with management to ensure they have an understanding of the computations and results of the tax provision.

Our Guidance = Your Advantage

Income tax accounting requires a team approach. Advanced collaboration must take place between the client, an internal or external audit team, and tax accounting professionals.

The Smith and Howard tax team understands the tax and financial statement implications and the rules related to GAAP and other accounting standards. We offer a practical, tech-based approach that maximizes efficiency and works within time constraints that are typical in the tax provision process.

We dig deep, analyzing your business outcomes in a given period. Once we understand the big picture of things like acquisitions, tax structures, losses vs. income, new business lines, and more, we factor them in to deliver an accurate, thorough tax provision. We then take this process a step further and look for tax planning opportunities for the company.

When done effectively, accounting for income taxes can provide valuable information to management and the users of the financial statements while allowing companies to manage cash flow related to taxes.

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What are the main components of a tax provision?

Current Income Taxes

Simply stated, current income taxes are the expected income taxes (federal, state and international) computed for the taxable year. Similar to preparing a tax return, this aspect of the tax provision involves calculating what your business expects to owe or has overpaid for the current year. This results in a balance sheet presentation of your estimated current tax liability or receivable. The current tax expense or credit is recorded on the income statement. This component of the tax provision is the one that can be reconciled to actual tax returns filed with the taxing authorities.

Deferred Income Taxes

Income is calculated differently for tax purposes than it is for financial statement purposes. Items that make up these differences between the two that are temporary and will reverse in future years result in deferred taxes. Deferred taxes are reported on the balance sheet and reflect an estimated asset or liability that is expected to be recognized in the future. The change in deferred taxes is generally reported each year as an expense or credit along with the current tax provision on the income statement. Like current income taxes, deferred taxes must also be computed for federal, state, and international operations.

Effective Tax Rate

A company’s effective tax rate is the income tax expense that is recorded on its books, divided by pretax income. This is an important metric that shows whether you are paying more or less than the expected statutory tax rate. Items such as tax credits and tax-exempt income can reduce your effective tax rate while non-deductible expenses and certain prior period adjustments can increase your effective tax rate. A business’s effective tax rate should always be analyzed to identify what caused any increases or decreases from the expected statutory rate.

Financial Statement Presentation

The final step in the tax provision process requires the proper presentation in your financial statements. This includes current and deferred income taxes on the income statement and balance sheet, disclosures related to cash payments and refunds in the statement of cash flows, and various disclosures related to the significant components of all income tax related items in the footnotes of the financial statements. Because many estimates must be made in preparing a tax provision, it is crucial that the financial statements adequately disclose a company’s income tax position, including any uncertain tax positions.

What clients are saying
Abatement Technologies Client Testimonial

“In recent years, Smith and Howard has been invaluable in keeping us abreast of changes to the tax code and wider environment. They’ve guided us through complex issues we had no knowledge of, and time and time again, it’s proved to be invaluable for us.”

Tom Nahigian, retired CFO of Abatement Technologies

“We use Smith and Howard for our audit, tax and special project work. Their advice and counsel is exceptional. Most recently, without Smith and Howard’s advice, we would have missed out on a $4M refund from a tax incentive program.”

David Seem, CFO, Miller-Zell

“Their mindset is different. They’re constantly looking to see what our objectives are and they’re giving us the best possible advice and keeping up with all the rules and regulations. It’s like having an expert looking over your shoulder with what you’re doing.”

Raj Anand, CEO, Southern States, LLC

The Smith + Howard Tax Provision Team

Our dedicated tax provision team – the best and brightest in the field – oversees all accounting for income taxes. We use the most efficient methods available and coordinate with the tax and audit teams to streamline processes. Our clients have confidence in our ability to accurately and timely prepare tax provisions and we do it with genuine care for your business.

Debbie R. Torrance
CPA/PFS
Partner
Smith + Howard Advisory LLC

I start every day reading a daily tax update so that I am a smarter and better tax professional every day. I also read more than 50 books every year of all types to be a smarter and better leader. I feel that excellence is the foundation to living up to our client and people values.

Melissa Horne
CPA
Partner
Smith + Howard Advisory LLC

Who am I without living with integrity? Definitely not a leader. Clients depend on us to be honest with them and in the work we do. Without honesty and integrity, we will lose the trust of our clients, our co-workers and those we encounter throughout our life.

Leslie Wright
CPA
Principal
Smith + Howard Advisory LLC

One of the reasons I joined Smith + Howard is because of their commitment to excellence. During the interview process, more than one person discussed the idea of 'smarter, better, every day' and I really wanted to join a team that looked for consistent improvement even when something was working well.

Megan Worth
CPA
Senior Manager
Smith + Howard Advisory LLC

I have always appreciated how the firm and management team invested in me and my career, and I intentionally do the same thing with our current tax staff every day. I firmly believe in investing in our people, and taking the time to teach and allow them to grow into the best accountants they can be is necessary for our success.

Tyler Heard
CPA
Manager
Smith + Howard Advisory LLC

My passion for solving problems, creating efficiencies, and embracing innovation help drive an environment where our firm can provide excellent value on every engagement.

A Firm of Distinction

18
Average provision experience tenure of principles, managers, and partners
4,000 +
Tax clients globally served
4
Consecutive years recognized as Forbes Best Tax and Accounting Firm in America

Additional Business Tax Services

Our services include:

  • Business tax planning
  • Entity selection
  • Tax accounting method selection and planning
  • International tax services
  • Multi-state tax services
  • Tax credits and incentives
  • Succession planning
  • Tax controversy
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Explore our other tax services:

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Business Tax

Our roots going back over half a century were grounded in tax. Today, while we can serve every aspect of your business’ financial life, we still stand on a strong tax foundation.

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Indirect Tax

When consumers purchase goods and services, they pay indirect taxes.

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Let’s talk about how you’re looking to grow your business

At each step of the way, we will work with you to maintain compliance and minimize your taxes, while establishing a long-term relationship built on quality counsel and efficient, responsive service.