Now, let’s talk about income for C Corp. A C Corp pays tax when the income is received (i.e., when the cash is received). This will create certain temporary and permanent differences between accrual income and taxable income.

For example, consider that a company receives a rent payment early – on the books, the early payment is not income yet, but for taxes, it is already considered income, creating a temporary difference. There are also permanent differences, which are items that are never taxable events, such as interest from a municipal bond or the deductibility of life insurance premiums.