I have gotten so many questions wrong today from simply not reading the question!
Umm M-1 differences, i kind of liked these..it brought me back to FAR with income tax accounting
here are some common ones and ill try to explain why:
– it says they had 50,000 for travel expense on the book- we add back 25,000 bc only 50% of it is deductible
– it says they had 25,000 federal tax expense, we add that back bc it doesnt get deducted for tax purposes
– it says we had 300,000 in muni bond income, we subtract it because that income isnt subject to tax
– penalties are another that don't get deducted so we would add that back to find taxable income
– maybe contributions were deducted for book purposes that are in excess of 10%, we would add that back
– life insurance proceeds are non taxable so we would subtract that out of income
– on the other hand if we deducted life insurance premiums when WE are the beneficiaries (and not the persons family) for book purposes, then we would add that back because it is not deductible for tax purposes
– depreciation could go either way so be careful
– if we accrued warranty expense but didnt pay anything out then we would need to add that back
– rent received in advanced would need to be added to income
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