Is cash received before revenue recognition taxed?
Suppose you get $10 of cash but the revenue isn't recognized yet. So the $10 goes into deferred revenue. In terms of cash tax accounting, we have +$10 of taxable income. But for book accounting we have no changes to income tax expense as the revenue isn't recognized yet. How does taxation work? Does the company pay taxes on the $10 cash received and then record an increase to DTA or does the company just let the cash sit on the balance sheet and then pay taxes later when the revenue is recognized?
In general, are companies liable for taxes (to the IRS) based off of their cash tax accounting numbers or their book accounting numbers?
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