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Book-to-Tax Differences


Edsel

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Back to the GAAP Discussion -

If there are book-to-tax differences, GAAP requires a "deferred tax liability" to be calculated and shown.  Not sure if there is a GAAP requirement if the difference turns out to be a Prepaid instead of a Liability.

A couple specific questions -

  • If the entity is a partnership with zero tax at the partnership level, the deferred liability doesn't exist unless it can use the difference calculated at the personal tax rates.  Should the entity calculate and present the liability which results from the personal taxes?  ( I believe it is obvious that this is not a Sch K-1 item)
  • In the rare event that the differences calculate to a PREPAID balance instead of DEFERRED balance, should the liability be shown?  This might be one of those situations where GAAP prefers to be conservative and blind to the optimistic.

Appreciate any responses.  Don't worry about whether I am trying to function as a CPA or not.

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I went through this the last round of posts regarding GAAP.

There was abundant conversation about whether I had any business asking about GAAP and whether I was trying to be a CPA (I'm not), and whether this was an appropriate forum for asking questions about GAAP.

And precious little simple response to the question posed.

Should we be adding "GAAP questions" to "Politics" as another prohibited topic on this forum?

Thanks in advance to those who may have the nerve to respond to the original questions.

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I'm an EA, not a CPA. When I do bookkeeping for entity clients, I keep the books on the tax basis. Then, when preparing the tax returns, I have NO book-to-tax differences. I can't help you. And, the only things I want to learn about GAAP is when it might be required for a client, when it might come into play when preparing tax returns, if ever.

I do think you need an accounting forum. If enough accountants are here and keep GAAP books for their clients, perhaps you could request a separate forum here. But, in the meantime, do look for a GAAP forum under CPA-specific sites, maybe AICPA.

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And precious little simple response to the question posed.

There is no SIMPLE response to any overly complex subject such as GAAP.  It's continually changing.

If you are not providing GAAP financial statements for clients - as almost all states require CPA or alternate licensing to do so, then why the interest in book-to-tax adjustments based on GAAP.  There is no crime in knowing what it is, but pretending to use CPA terminology when you are not a CPA is quite hypocritical.

If you're that interested in GAAP compliance, then I suggest you search the multitude of CE publishers/promoters who sell GAAP subject information or as Lion suggests - go to AICPA website.

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You are not going to find many tax preparers that are familiar enough with GAAP to answer questions/explain something that's not tax basis. You're looking for love in all the wrong places. Go to a forum full of experts or work with a local mentor.

PS: Please don't insult us because we don't know everything about everything. I don't attempt to answer QB questions or computer questions, either. And, it's a holiday weekend so don't expect all of us to be around.

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On 8/30/2019 at 7:51 PM, Edsel said:

Back to the GAAP Discussion -

If there are book-to-tax differences, GAAP requires a "deferred tax liability" to be calculated and shown.  Not sure if there is a GAAP requirement if the difference turns out to be a Prepaid instead of a Liability.

A couple specific questions -

  • If the entity is a partnership with zero tax at the partnership level, the deferred liability doesn't exist unless it can use the difference calculated at the personal tax rates.  Should the entity calculate and present the liability which results from the personal taxes?  ( I believe it is obvious that this is not a Sch K-1 item)
  • In the rare event that the differences calculate to a PREPAID balance instead of DEFERRED balance, should the liability be shown?  This might be one of those situations where GAAP prefers to be conservative and blind to the optimistic.

Appreciate any responses.  Don't worry about whether I am trying to function as a CPA or not.

I am picturing a set of financial statements prepared under GAAP and I am imagining a disclosure like this:

Partner A tax liability was calculated at 33%

Partner B tax liability was calculated at 25%

Etc...

Each partner would able to know how much each partner personally makes or declares.

^^ This is probably the reason why we never see this on Partnership audited financial statements , FYI I am not a CPA and this is only an assumption.

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On 8/31/2019 at 10:12 AM, Edsel said:

I went through this the last round of posts regarding GAAP.

And precious little simple response to the question posed.

Should we be adding "GAAP questions" to "Politics" as another prohibited topic on this forum?

Thanks in advance to those who may have the nerve to respond to the original questions.

 

11 hours ago, Edsel said:

I get the message.  No GAAP questions on this forum.  By the silence of other members, this is confirmed.

Only Levites were permitted to touch the Ark of the Covenant.  Only CPAs should be discussing GAAP. 

Questions regarding GAAP are not prohibited and certainly should not be equated with the reasons for this forum no longer hosting political discussions or commentary.  With this site being a tax forum having a diverse membership, the field of those knowledgeable or qualified to answer is already narrowed down, and people help when they have the time and to whom they choose.  It is also the offseason and a holiday, and some of the answers to the questions you posed are not simple or quick.  Furthermore, chiding and goading our membership into answering usually doesn't work too well around here. 

Since you continue to find this forum's rules distasteful, and you feel our members do not provide you with answers quickly enough or that meet your needs, perhaps you should seek answers from another source, a larger and more active forum, or possibly one of the Yahoo Groups.

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Edsel,

You have a tendency to ask incomplete questions and then dribble out additional tidbits of important details over your next 2 or 3 posts,

so that when someone answers your first post, our posts are usually wrong or not useful.

My personal choice is that I will not reply to any more of your posts.

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Probably true Mr. Lee.

In many cases what makes a question incomplete is a series of remote events which may serve only to complicate the answer.  The only way to defend against this is to so burden the question with so many qualifiers that the question/answer exchange becomes so cumbersome nothing constructive comes out of it.

A general question may be answered as if the situation is so mainstream that there are no other relevant factors.  This simplifies the question, the answer, and the discussion.

I would hate for you to stop replying to my posts.  You are often a source of accurate and reliable information.

 

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We do have others here too that fail to provide all of the relevant information so assumptions are made in an attempt to help out as best we can with our answers. Sometimes those incomplete questions are the result of not knowing what one does not know, that the preparer is immersed in the current problem without stepping back to see the larger picture, or that the first answers are correct but that lead to further discussion.  I think we should remember that what we work with frequently may be an easy question to answer, but to someone else may be a confusing topic or insurmountable problem to solve for the client.  🏔️

I think most of the time we do eventually get to the correct answers, and sometimes we wander off on tangents that end up off-topic but can be an opportunity for learning nonetheless. 🎓

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On 9/1/2019 at 9:08 AM, Edsel said:

Come to Tennessee sometime.

Hey, Edsel, I do get to TN from time to time with Appalachia Service Project (as well as KY, NC, VA, and WV). We drive in "caravans" so don't get to deviate from our route, unfortunately. Beautiful state. But, appalling living conditions in Appalachia. I even have three TN clients, not in Appalachia.

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If you ever get to Manchester, I'll meet you and buy y'all dinner.  (But not your whole caravan).  Manchester is a small town, but strategically located on I-24 halfway between Nashville and Chattanooga.  It is the first town north of Monteagle mountain.  Monteagle is the highest point on the route between Miami and Chicago.

Living conditions in Appalachia, from WV to AL, have been well publicized on TV commentaries, particular those involving coal.  Trust me when I say some of the finest people on earth live in these places.  I go there often to play bluegrass music.  The poverty is abundant if you're looking for it but there is so much more. And over the years, some of the portrayals of these horrible living conditions are coming from places considered to be enlightened, such as Detroit, Chicago, Newark NJ, etc.

One example is McDowell County in West Virginia, the poorest per capita income county in the U.S.  You can tell it just by driving through it.  However, the story of Homer Hickam and the "Rocket Boys" (from the Jake Gyllenhaal movie "October Sky") was backdropped in that county because that was their residence.  Another untold story about Homer's father - he was the inventor of the most current commonly used slender personal rescue device used in coal-mining accidents.  And banks, who hold life-and-death power over so much in our economy, barely populate McDowell county - as fewer than 10% of the homes are held by a mortgage, also a low for U.S. counties.  The people there are incredibly resourceful and independent.

I realize this is a tax forum and not designed to be a social commentary - but I would love to meet you if you are traveling through.  I think you are a great member of the forum and appreciate your posts from time to time.

 

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Our group has been in McDowell County, WV; but I don't think I was there. My daughter (who started me doing ASP) has been in McDowell County. I've been repairing homes for ASP in TN, KY, VA, and WV. I was in Sullivan County, TN, a couple of years ago when hubby went along. This year, part of our group was in Johnson County, TN. The counties we serve have lots of churches and some of the finest people I have met. We always have a picnic, usually in a national or state park with great views, and invite the families we serve. And, a culture night that is frequently a local bluegrass band that gets us all up dancing. Part of this summer's group visited the Appalachian Folk School, Mountain City, TN, and danced to "Twist and Shout" performed by Toss the Possum. Jesse Lee ASP Group out of Ridgefield, CT, is the second largest ASP group in the country with nearly 300 volunteers each summer; so we're usually in 3-5 five different centers. This year we were in Washington and Johnson Counties in TN and Knox and Breathitt Counties KY.

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