The Treasury Department and Internal Revenue Service have issued final regulations addressing how certain taxpayers should report income and advance payments under an accrual method of accounting. These regulations, influenced by the Tax Cuts and Jobs Act, require that income be reported no later than when it is recorded in a taxpayer’s financial statement. The regulations also allow some taxpayers to defer reporting income from advance payments to the next taxable year, provided it matches the company's financial statement treatment. These rules aim to ensure consistency between tax reporting and financial accounting.
Simple Explanation
The Treasury Department and IRS made new rules so that businesses who keep track of money they earn and spend can do it in a way that matches their financial reports, especially when they get money before doing the work. This helps everything line up nicely and makes it fair when they say how much they earned.