We kept a nonrefundable booking fee but moved the project to next year. When is it income?
Nonrefundable Fees After a Project Is Rescheduled. A specific owner scenario, the facts that change the answer, and the records needed for a tax review.
By AE Tax Advisors Team · Updated October 28, 2026
A nonrefundable advance can have different timing from a refundable security deposit. Rescheduling work does not automatically defer the receipt. Review payment rights, the business's tax method and any applicable advance-payment rules.
A specific business-owner situation
A service firm collects a booking fee in December and agrees to perform the project next March. The client cannot demand a refund but can reschedule. The owner should distinguish the unconditional payment from amounts still contingent on completing work.
Illustrative example, not a client result.
What to establish before filing
- Read refund, forfeiture and rescheduling provisions.
- Confirm the tax method for advance payments.
- Reconcile later invoices so the fee is not counted twice.
Which fact changes the answer?
A customer right to a cash refund can change the analysis. Identify substantive rights rather than relying on a fee's marketing description or the label used by the scheduling software.
A mistake to avoid
Deferring every fee to the work date because the books show deferred revenue can misapply the tax method.
Records that support the decision
- Booking contract.
- Payment receipt.
- Rescheduling agreement.
- Advance-payment method records.
The decision to document
Ask the preparer to document the current-year treatment and later application. Keep tax and management-reporting adjustments visible when they differ.
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Related questions
- A customer is holding disputed retainage. Do I report the whole invoice as income?
- We issued a service credit instead of a refund. Can we deduct it before the customer uses it?
Sources and editorial context
General educational information prepared with AI assistance. No individual professional review is claimed. Apply the relevant tax-year rules to the actual records. Editorial policy · AI disclosure.