Video: Permanent Differences Between Book and Tax Income

In this lesson, Nick Palazzolo, CPA, breaks down the key concept of permanent differences in accounting, explaining why certain income and expenses never reconcile between financial accounting and tax reporting. With easily understandable examples such as tax-exempt interest and fines and penalties, Nick outlines why these items differ and how they impact the financial statements versus the tax returns of a company. He also navigates through the complexities of non-deductible meals and entertainment expenses, as well as the dividends received deduction, illustrating the calculations with a hypothetical company scenario. Nick's clear presentation elucidates how these permanent differences will influence a company’s reporting without reversing over time.