Income Taxes
M5 – M6
,Income Taxes
• Accounting income = GAAP
• Federal income = IRS
• Intraperiod: allocate current year income tax, internal issue.
• Interperiod: allocate between year, permanent and temporary
differences.
, Permanent differences
• Recognize of a taxable event.
• Taxable income or Books income, but not both.
• Revenue and/or Expenses recorded on Books and never recorded on
Taxable income, vise versa.
• No deferred tax, impact current year tax only.
• Examples:
Tax-exempt interest (municipal – state).
Life insurance proceeds on officer’s key policy.
Life insurance premiums when corporation is beneficiary.
Certain penalties, fines, and bribes.
50% of meals, and entertainment expenses.
Dividend received deduction for corporations.
excess % depletion over cost depletion.
M5 – M6
,Income Taxes
• Accounting income = GAAP
• Federal income = IRS
• Intraperiod: allocate current year income tax, internal issue.
• Interperiod: allocate between year, permanent and temporary
differences.
, Permanent differences
• Recognize of a taxable event.
• Taxable income or Books income, but not both.
• Revenue and/or Expenses recorded on Books and never recorded on
Taxable income, vise versa.
• No deferred tax, impact current year tax only.
• Examples:
Tax-exempt interest (municipal – state).
Life insurance proceeds on officer’s key policy.
Life insurance premiums when corporation is beneficiary.
Certain penalties, fines, and bribes.
50% of meals, and entertainment expenses.
Dividend received deduction for corporations.
excess % depletion over cost depletion.
