Tax books. Records kept by a firm's management that follow IRS rules. The books follow Financial Accounting Standards Board rules.

M-1 adjustments: reconciliation of book and taxable income (income and deductions.) Differences exist because of the difference in GAAP and tax law.

Reconciliation Formula. In general, to reconcile book income to taxable income, we will add back expenses that are not tax deductible, add revenue that was not included in book income, subtract deductions not included in the calculation of book income, and subtract tax-exempt earnings.

Most income is taxable unless it's specifically exempted by law. Income can be money, property, goods or services. Even if you don't receive a form reporting income, you should report it on your tax return. Income is taxable when you receive it, even if you don't cash it or use it right away.