Tobac Company reported an operating loss of $122,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25% for 2021 and all future years. Assume that Tobac operates in an industry for which NOL carryback is allowed and elects a loss carryback. No valuation allowance is needed for any deferred tax assets. Taxable income, tax rates, and income taxes paid in Tobac's first four years of operations were as follows:     Taxable income Tax rates Taxes paid 2017 $ 20,000     30 % $ 6,000   2018 $ 25,000     30 % $ 7,500   2019 $ 32,000     35 % $ 11,200   2020 $ 30,000     40 % $ 12,000

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Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.