Common Book Tax Differences Lecture Note PDF

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Lecture note on common book tax differences for financial accounting first semester of the course on taxation. This was very helpful....

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Common Book-Tax Differences on Schedule M-1 for Form 1120 The purpose of the Schedule M-1 is to reconcile the entity’s accounting income (book income) with its taxable income. Because tax law is generally different from book reporting requirements, book income can differ from taxable income. Below is a list of common book-tax differences found on the Schedule M-1. The list is not all-inclusive.  

Federal income tax per books Excess of capital losses over capital gains

Income on tax return, not included on books   

Federal tax credit income Tax gain on sale of assets in excess of book gain on sale of assets Installment sales

Expenses on books, not included on tax return           

Book depreciation in excess of tax depreciation 50% of travel/meals and entertainment not deductible on tax return Charitable contributions Fines and penalties Officer's life insurance premiums Prepaid expenses Book loss on sale of assets in excess of tax loss on sale of assets Accrued vacation and bonus Political contributions Expenses incurred in earning tax exempt interest Portion of organizational & start-up costs not included on tax return

Income on books, not included on tax return    

Tax-exempt interest Book gain on sale of assets in excess of tax gain on sale of assets Installment sales Officers' life insurance proceeds

Deductions on tax return, not included on books      

Tax depreciation in excess of book depreciation Charitable contributions Prepaid expenses Tax loss on sale of assets in excess of book loss on sale of assets Accrued vacation and bonus U.S. Production Activities Deduction...