An advance payment received in June 2019 by an accrual basis and calendar year taxpayer for services to be provided over a 36-month period can be spread over four tax years.

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Under the accrual basis accounting, income is recognized when earned, not when received. However, for tax purposes, the IRS allows taxpayers to defer income received for services to be performed by the end of the next tax year. Since the services are to be performed over a 36-month period starting from June 2019, the income can only be spread over three tax years (2019, 2020, and 2021), not four.

An Advance Payment Received in June 2019 by an Accrual