TIMING
Income Deferral
IRC §451
Cash-basis self-employed can defer income by delaying invoicing.
Eligibility
Cash-basis self-employed
Frequently Asked Questions
Who is eligible for the Income Deferral?
Cash-basis self-employed
How does the Income Deferral work?
Cash-basis self-employed can defer income by delaying invoicing.
What law authorizes the Income Deferral?
The Income Deferral is authorized under IRC §451 of the Internal Revenue Code (Title 26, United States Code).
Parameters
amount int
income deferred to next year
Statutory Text — IRC §451
Source: Internal Revenue Code, Title 26, United States Code
§ 451. General rule for taxable year of inclusion(a) General ruleThe amount of any item of gross income shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under the method of accounting used in computing taxable income, such amount is to be properly accounted for as of a different period.
(b) Inclusion not later than for financial accounting purposes(1) Income taken into account in financial statement(A) In generalIn the case of a taxpayer the taxable income of which is computed under an accrual method of accounting, the all events test with respect to any item of gross income (or portion thereof) shall not be treated as met any later than when such item (or portion thereof) is taken into account as revenue in—(i) an applicable financial statement of the taxpayer, or
(ii) such other financial statement as the Secretary may specify for purposes of this subsection.
(B) ExceptionThis paragraph shall not apply to—(i) a taxpayer which does not have a financial statement described in clause (i) or (ii) of subparagraph (A) for a taxable year, or
(ii) any item of gross income in connection with a mortgage servicing contract.
(C) All events testFor purposes of this section, the all events test is met with respect to any item of gross income if all the events have occurred which fix the right to receive such income and the amount of such income can be determined with reasonable accuracy.
(2) Coordination with special methods of accountingParagraph (1) shall not apply with respect to any item of gross income for which the taxpayer uses a special method of accounting provided under any other provision of this chapter, other than any provision of part V of subchapter P (except as provided in clause (ii) of paragraph (1)(B)).
(3) Applicable financial statementFor purposes of this subsection, the term “applicable financial statement” means—(A) a financial statement which is certified as being prepared in accordance with generally accepted accounting principles and which is—(i) a 10–K (or successor form), or annual statement to shareholders, required to be filed by the taxpayer with the United States Securities and Exchange Commission,
(ii) an audited financial statement of the taxpayer which is used for—(I) credit purposes,
(II) reporting to shareholders, partners, or other proprietors, or to beneficiaries, or
(III) any other substantial nontax purpose,
but only if there is no statement of the taxpayer described in clause (i), or
(iii) filed by the taxpayer with any other Federal agency for purposes other than Federal tax purposes, but only if there is no statement of the taxpayer described in clause (i) or (ii),
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