Lesson: Basics of Deferred Taxes

In this lesson, Nick Palazzolo, CPA, demystifies the complexities of deferred taxes, explaining the key differences between income tax expense reported on the income statement and actual income tax liability reflected on the balance sheet. Nick breaks down the creation of deferred tax liabilities and assets due to temporary differences that arise from discrepancies between GAAP guidelines and IRS regulations. Using relatable examples, he illustrates how these differences can result in either a future tax payment or a tax benefit for a company. Additionally, he lays out a practical approach for understanding how these deferred tax items are presented financially, reinforcing the importance of mastering this concept with visual aids and repetition. Whether the topic is new or serves as a review, the examples provided in this lesson are designed to pave the way for a solid grasp of deferred taxes and their impact on a company's financial statements.