[Getting a CPA]

Can someone please simply income tax effects for me? I get uber confused with taxable income and financial statement income conversion.

Thanks for any help!!!

[SammyJ]

Well the Becker books and materials do a lot better job than I would. But essentially what you are dealing with is trying to distinguish the difference between Book Income(FInancial statements) and Taxable Income(Form 1040, Sch A-F, etc). I guess the best way to learn is by creating a list of non-taxable and non-deductible things.

For example, for financial statements, we have depreciation. We depreciate our equipment and take the loss on our F/S. However, for IRS tax purposes, they don't recognize depreciation when calculating taxable income. So your net income(derived from your books) must add depreciation back in to mitigate that effect. And other things tax forms ignore include municipal bonds, penalties for late payments, life time insurance premiums for key employees and etc. All this stuff you can find in your study materials.

I hope this helped! Good luck!

FAR-81!!
AUD-69, Retake: 84!!
REG-86!!
BEC-81!!
Education- Done
Ethics- August 2013
Experience- 7 Months of CPA Experience and counting!

[Givemesleep]

Depreciation is deductble. Different method than book, but deductible.

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[Getting a CPA]

Can you speak about deferred tax assets and liabilities as well? How do I reverse the entries when there are temporary differences? I am using CPAExcel as my review course, and they do a decent job of explaining it, but layman's terms always help! Sammy J – your explanation already makes a lot of sense.

Thanks both!

[Author]

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