§455 Prepaid Subscription Income

Summary

Prepaid subscription payments must be reported as income during the years you still owe delivery. If the delivery obligation ends, or if the business owner dies or the business stops existing, any prepaid money that was not reported before must be reported in the year the obligation ends, the owner dies, or the business ceases. For tax timing, that prepaid money is treated as received in the year it has to be included under section 451. Definitions: "prepaid subscription income" — money received for a newspaper, magazine, or other periodical that covers future issues; "liability" — the duty to provide or deliver those issues. A taxpayer must choose (elect) to use this rule for a specific trade or business. You cannot elect it if you use the cash method of accounting for that business. Once you elect, it applies to all prepaid subscription income for that business, though you may report the whole amount in the year received if the delivery obligation will end within 12 months. You can ask the IRS to let you elect at any time. Without IRS consent, you must make the first election by the tax-return due date (including extensions) for the first year you get such prepaid income. The election stays in effect for later years unless the IRS agrees to revoke it, and the election counts as a tax accounting method. If you already used a steady, established method for reporting prepaid subscriptions before this rule first applied to you, you may keep using that method.