Measure current tax from the book-tax bridge

Current tax begins with a reproducible taxable-income bridge, not with the tax expense line and not with cash paid.

Keep adjustment signs verbal

Use a convention once and state it above the table: positive adjustments increase taxable income relative to pretax book income; negative adjustments decrease it.

Pretax book income                         $1,000,000
Less: additional tax depreciation           (120,000)
Add: warranty expense deductible later         60,000
Less: tax-exempt municipal interest            (20,000)
Add: nondeductible penalty                       10,000
Less: permitted NOL deduction                  (100,000)
Taxable income                                $830,000

At a 21-percent enacted current rate, $830,000 × 21 percent produces $174,300 of gross current tax. A supplied $4,300 current credit reduces return tax to $170,000. The bridge does not measure the ending DTA for the remaining NOL or turn the credit carryforward into a deduction; those belong to the deferred rail.

Return tax is not always recognized current expense

A return can claim a benefit that the financial statements do not fully recognize under the uncertain-tax-position model. Changes in unrecognized benefits and any interest or penalties classified in income tax expense alter recognized current tax expense without changing the return arithmetic. Keep the steps visible:

Return current tax
  + increase in unrecognized tax benefits
  - decrease in unrecognized tax benefits
  + interest and penalties classified in income tax expense
  = recognized current tax expense or benefit

The legal recognition conclusion arrives in Lesson 7. Here the point is the architecture: do not plug the difference into deferred tax or cash. In the Cedar Trail companion, the later uncertainty rollforward adds $4,000 and the income-tax policy adds $2,000 of interest and penalties, carrying $170,000 of return tax to $176,000 of recognized current tax expense: $170,000 + $4,000 + $2,000 = $176,000.

Reconcile the current balance

The current payable or receivable rollforward is separate again:

Opening current tax payable or (receivable)
  + return current tax accrued
  - estimated and final payments
  + refunds received or other supplied settlement effects
  = ending current tax payable or (receivable)

For the bounded companion, a $30,000 opening payable plus $170,000 return tax less $160,000 cash paid yields a $40,000 ending current payable. Unrecognized tax benefits remain separately identified rather than being silently folded into that balance.

Close the current rail

Reperform taxable income from the final pretax ledger, name every adjustment, apply the enacted current rate, distinguish credits from deductions, bridge return tax to recognized current expense, and reconcile the current balance to cash. Any difference labeled “other” needs an evidence owner before release.