Accounting for Income Taxes
In This Chapter
Finding out why financial and taxable income may differ
Taking a tax deduction for a net operating loss
Comparing example book and tax statements
Seeing how the balance sheet is affected by temporary differences
Nobody likes paying taxes. As you read this chapter, it may bring back bad memories of the last time you prepared and filed your own individual tax return. I hate to break it to you, but you have many more glorious years of paying taxes ahead of you! Income taxes are a fact of life. Depending on where you live, you may have to pay federal, state, and local income taxes.
Most businesses have to pay taxes too. I say most because one type of business entity, a flow-through entity, files an information tax return only. An example of a flow-through business entity is a partnership, which is a business with at least two investors (partners). Informational means that while the tax return shows items of income and expense, the business itself doesn’t pay the income tax — the partners do.
While preparing income tax returns may ...