Does your business receive advance payments from customers? For federal tax purposes, these payments generally are taxable in the year received. But accrual-basis businesses may have another option. If certain requirements are met, these businesses can defer some or all eligible advance payments to the next tax year. That means qualifying payments received in 2026 can be deferred to 2027. Gift cards, software licenses, warranty contracts and subscriptions are examples of payments that may qualify for deferral — if the income won’t be recognized for financial reporting purposes until next year. Contact us to discuss whether advance payment deferral can be part of your year-end tax strategy.
