Deferred Tax Rate Calculator Template for Excel

What is deferred tax?

A deferred tax causes a reduction in the taxable income of the person. The person is required to calculate the deferred tax when he pays the tax more than it is required. There are some pending payments that an internal revenue service is required to pay.

The situation of deferred taxes takes place when there are a whole lot of tax expenses. Sometimes, there is a huge difference between the revenue earned by the business and the taxable revenue receipt. There is limited taxation on the revenue generated by any business. Since taxation is an application of the revenue, the company should be able to recognize its revenue.

Why is deferred tax calculation important?

The deferred tax is very important to be calculated because it is one of the most important accounting parameters to be taken into consideration. The effect of the tax on the revenue can be determined by using deferred tax calculator.

How to calculate the deferred tax?

In order to calculate the deferred tax, you should be aware of the rules that need to be followed to reach accurate and precise results. Here we are going to give you step by step that will help you calculate the deferred taxes easily

Make a table and note down all the assets and liabilities in two different columns. It is recommended to mention your liabilities as a negative number and assets as a positive number. Make sure that you keep the equity accounts into consideration to make sure that your calculations don’t stay incomplete because of missing anything important. It should be kept in mind that the total of all the values added to the table should be zero. This is the best way to ensure the correctness in the record
For each asset and liability, calculate the tax base. In the case of assets, the tax base is an amount that is deductible for the purpose of the tax. Whereas, in case of liabilities, the tax is a carrying amount that is deductible for tax purpose on the basis of liabilities in future
Calculate all the taxable temporary difference. The temporary tax differences can be either negative or positive.
When all the assets and liabilities are taken into consideration, the deferred tax applies to this period and the tax rate is determined.
Calculate the deferred tax on assets and liabilities. The taxable temporary differences are negative if deferred tax liabilities rise. Similarly, the taxable temporary differences will be calculated to be positive if the calculations show the rise in deferred tax assets.
If there is anything that you have not included while making calculations, add it at the end of the calculation process and repeat the calculation