5 Things Insurers Need for Proper Tax Accounting & Reporting

In the complex world of insurance investment accounting, maintaining accurate records and complying with tax regulations is paramount. One crucial aspect of this intricate process is tax accounting. Here, we explore what tax accounting is and highlight five essential elements insurers need to ensure proper tax accounting and reporting.

Understanding Tax Accounting

Companies are required to submit quarterly and annual income tax provision calculations, which are an estimate of the total income tax expense for the reporting period. The tax provision is made up of the current and deferred income tax expense. The current income tax expense includes the income tax payable for the current period based on applying current tax law to the taxable income or loss of the current period. The deferred income tax expense represents the anticipated future tax expense arising from activity in past or current periods where that future tax expense will arise due to temporary differences between the book value and tax value of certain items that will reverse in the future. The distinction here is of differences between book value and tax values that will reverse in the future—such differences are considered temporary whereas differences that will not reverse in the future are considered permanent.

Read the Full Article here