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So deferred tax assets (DTAs) can be challenging.
However, understanding them is essential tominimizing your tax liability.
What Is a Deferred Tax Asset?
It arises when an organizations accounting income is lower than its taxable income.
This is usually due to how items are treated for accounting purposes as opposed to their tax purposes.
But that doesnt mean you will never get to claim them.
It merely means that you must wait until a future tax season.
These will be explained further below.
Deferred Tax Assets Vs. For claritys sake, a common example of adeferred tax liabilityis an installment sale.
When the sale is made, your companys books reflect the total amount of the sale.
So, you know that you will have to pay taxes on the remaining payments infuture fiscal periods.
That is your deferred tax liability.
Here are some common examples.
Here are common ways deferred tax assets impact and shape a companys strategy and financial reporting.
Deferred tax liabilities are recorded the same way.
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