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 when 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 for 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.
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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 33 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 November 14, 2019.
Call 1-866-352-9540 for further credit information.
Enrolled Agents 1.0
- This program qualifies for 1.0 hours of Continuing Education Credit for enrolled agents under Treasury Department Circular #230 Section 10.6(g).
This program does NOT qualify, nor meet the National Standard for NASBA accreditation.
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- Arizona CLE 1.5
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- ME CLE 1.5
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- NJ CLE 1.8
- NV CLE 1.5
- VT CLE 1.5
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- WV MCLE 1.8
This program does NOT qualify, nor meet the National Standard for NASBA accreditation.
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Why Lorman?
Over 33 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 is focused on taxation of high net worth individuals and investment entities including partnerships and S corporations
- Adjunct assistant professor at Walsh College where he teaches courses in their Masters of Science in Taxation program (partnership taxation and tax accounting)
- 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; B.A. degree in business administration, University of Michigan - Dearborn
- Can be contacted at 866-717-1607 or [email protected]
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Why Lorman?
Over 33 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.
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