Corporate Tax | Book to Tax
Where the accounts and the return diverge, recorded as it happens.
Meals, penalties, depreciation, accruals and reserves all sit differently in the books than on the return. Each difference is classified when the transaction is posted rather than hunted for afterwards, so the reconciliation and the deferred tax position build through the year instead of being reconstructed from a trial balance in March.
What the system does
Capability, input, output.
| Capability | Input | Output |
|---|---|---|
| Difference classification | A transaction in a flagged account | Permanent or timing, tagged at posting with its basis |
| Depreciation bridge | Book and tax depreciation methods | Both computed from the same asset register, with the difference carried |
| Accrual timing | Accruals not deductible until paid | Identified and tracked to the period they reverse in |
| Reconciliation | The classified differences for the year | The M-1 workings, generated rather than rebuilt |
| Deferred tax | Timing differences and their reversal | The deferred position, with the schedule behind it |
| Drill-through | Any difference on the reconciliation | The transactions producing it, down to the document |
| Advisor handoff | A completed year | The workpaper set your advisor asks for, in one export |
-
Difference classification
- Input
- A transaction in a flagged account
- Output
- Permanent or timing, tagged at posting with its basis
-
Depreciation bridge
- Input
- Book and tax depreciation methods
- Output
- Both computed from the same asset register, with the difference carried
-
Accrual timing
- Input
- Accruals not deductible until paid
- Output
- Identified and tracked to the period they reverse in
-
Reconciliation
- Input
- The classified differences for the year
- Output
- The M-1 workings, generated rather than rebuilt
-
Deferred tax
- Input
- Timing differences and their reversal
- Output
- The deferred position, with the schedule behind it
-
Drill-through
- Input
- Any difference on the reconciliation
- Output
- The transactions producing it, down to the document
-
Advisor handoff
- Input
- A completed year
- Output
- The workpaper set your advisor asks for, in one export
Book to Tax FAQ
What buyers ask.
Why not just do this at year end?
Because at year end the information needed to classify a difference is gone. Whether that expense was entertainment or a client meal, whether that accrual will be paid within the period, whether that legal fee was a penalty, all obvious at the time and archaeology nine months later.
Does this replace our tax advisor?
No, and it should not read that way. It removes the assembly work that makes their engagement expensive: the trial balance mapping, the difference hunt, the depreciation bridge. What is left is the judgement you are paying them for.
How does the depreciation bridge work?
Both book and tax depreciation are computed from the same asset register on their own methods and lives, so the difference is derived rather than plugged. Hand-built bridges usually carry forward last year’s difference and adjust it, which works until an asset is disposed of.
Do you compute the deferred tax position?
The schedule of timing differences and their expected reversal, yes, with the workings shown. The rate applied and the judgement on realisability are decisions for you and your advisor, and we do not pretend otherwise.
We are a pass-through with no entity-level tax. Is this useful?
Yes, and often more so. The differences still exist and still have to be reported on the return and allocated to owners, and pass-throughs are where the book-to-tax work most often gets skipped on the assumption that no tax means no reconciliation.
More in Corporate Tax
Related features
See your book-to-tax differences build from the ledger.
Connect your books, free. Differences are tagged as transactions post, and the reconciliation assembles from them.