Identify book and tax differences in computing taxable income and how these differences are reported in the tax return.
Taxpayers maintain their books and records on various methods of accounting and have different objectives when preparing financial statements and completing tax returns. Taxpayers are generally required to provide a reconciliation of book and taxable income in their business tax returns, as well as a reconciliation of their equity. This presents many issues for tax return preparers and their clients. This topic will help you identify book and tax differences in computing taxable income and how these differences are reported in the tax return. We will identify the starting point, book income, and common differences in computing book and taxable income. As Schedule M-1 presents a bridge between book and taxable income which the IRS uses in ascertaining whether taxable income is properly stated, and Schedule M-2 is a reconciliation of equity, it is important for tax return preparers and their clients to understand how to complete these schedules. Failure to properly complete these schedules can result in increased IRS scrutiny and questioning.
Learning Objectives
- You will be able to recognize book/tax differences and how they affect the reconciliation of book to taxable income
- You will be able to differentiate what entities are required to complete Schedules M-1 and M-2.
- You will be able to differentiate between tax and book income and expenses
- You will be able to identify a business entity tax return and understand the Schedule M-1 and M-2 reconciliations
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Agenda
What Are Schedules M-1 and M-2
- M-1 - Reconciliation of Book and Tax Income
- M-2 - Reconciliation of Equity
Which Entities Are Required to Complete Schedules M-1 and M-2
- Corporations
- Partnerships
- Who Is Exempt
Identifying Your Starting Point - Book Income
- Basis of Accounting for Book Income
- GAAP vs. Tax vs. OCBA
Identifying Book/Tax Differences
- Permanent Differences
- Timing Differences
- Categories of Differences
Completing Schedule M-2
- Retained Earnings
- Capital Accounts
- Other Reconciling Items
Examples
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Why Lorman?
Over 37 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
Credits
OnDemand Course
This course was last revised on January 19, 2023.
Call 1-866-352-9540 for further credit information.
- AIPB 1.5
- This program is acceptable for 1.5 CPEC(s) towards the CB designation through the American Institute of Professional Bookkeepers (AIPB).
CPE/NASBA - QAS Self Study 2.2 including Taxes 2.2
- Lorman Education Services is registered with the National Association of State Boards of Accountancy (NASBA) as a QAS Self Study sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its web site: www.nasbaregistry.org. For more information regarding administrative policies such as complaint and refund, please contact our offices at 866-352-9539. CPE Credit: Maximum Credit Hours: 2.2 each session (based on a 50 minute credit hour). You must attend at least 50 minutes to obtain credit. Field of Study: Taxes for 2.2 hours. Prerequisite: . Level of Knowledge: Intermediate. Teaching Method: Seminar/Lecture. Advance Preparation: None. Delivery Method: QAS Self Study. Please refer to the information in this advertisement for outline, course content and objectives. Upon completion of this course, you will receive a certificate of attendance. Final approval of a course for CPE credit belongs with each state's regulatory board.
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Why Lorman?
Over 37 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
Faculty
John T. Alfonsi, CPA/ABV/CFF, CFE, CVA, MST
Cendrowski Corporate Advisors
- Managing director of Cendrowski Corporate Advisors
- Practice focuses on taxation of high-net-worth individuals and investment entities, including partnerships and S corporations
- Adjunct professor at Walsh College, where he teaches courses in their Masters of Science in Taxation program (partnership taxation and tax accounting)
- Recognized valuation and economic damages expert in federal and various state circuit courts
- Frequent speaker for the Michigan Association of Certified Public Accountants on topics covering taxation, business valuation, and forensic accounting
- Member of the AICPA, MICPA, ACFE, NACVA, and MVCA
- M.S. degree in taxation, Walsh College; B.A. degree in business administration, University of Michigan-Dearborn
- Can be contacted at [email protected] or 866-717-1607
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