IRS Releases Final Regs Eliminating Option to Defer Recognition of Advance Payments Post-Reform, Aug. 8, 2019

The IRS has released final regulations implementing a provision in the 2017 tax reform legislation that eliminates the ability of accrual method business owners to defer recognizing advance payments until the year the payment is recognized in the taxpayer's books. Under the new law, taxpayers must recognize advance payments no later than when those payments are recognized in the taxpayer's applicable financial statement--generally, in the year the payment is received or, under Section 451(c), to elect partial deferral into the following year. The final regulation is effective as of July 15, 2019. It is generally expected that the IRS will release additional guidance as to the detailed implementation of the new rules. For more information on the post-reform accounting treatment of advance payments, visit Tax Facts Online.