Module 3: Differences Between Book and Tax

Question 1

Temporary differences

Answer 1

Items of income/expense that are recognized in one period for book but in a different period for tax

In the long run there is no difference

Question 2

Permanent differences

Answer 2

Items of income/expense that are recognized for book but never recognized for tax, or vice versa

Question 3

When is a company required to reconcile book and taxable income on Schedule M-3?

Answer 3

If the total assets of the company are $10M or greater

Question 4

Different basis of asset: GAAP vs Tax

Answer 4

GAAP = FV
Tax = NBV

Question 5

Accrued expenses

Answer 5

No deduction until paid for Tax return

Question 6

What items are included in Schedule M-1?

Answer 6

Items that are:

1. reported as income for book purposes but not for tax purposes
2. reported as an expense for book purposes but not for tax purposes
3. reported as taxable income for tax purposes but not as income for book purposes
4. reported as deductible for tax purposes but not as expense for book purposes