Deferred Income Taxes

Deferred Income Taxes arise when the income taxes expense and the income taxes payable are not the same.  This can happen due to differences in the accounting method of calculating income tax expense, and the IRS method of calculating income taxes payable.  The difference between these two income tax calculations results in an inter-period income tax allocation.

Deferred income taxes is the accounting category that recognizes the difference between taxes payable and tax expense.  Since deferred income taxes are a placeholder for a future tax obligation of the company, it appears as a liability on the company's balance sheet.