Cash Basis TP - Returning customer's prepayment

Cash basis C-Corporation with a 3/31 fiscal year-end received a $300K payment from a customer on 3/27 they were not supposed to* receive until April. The funds were wired into their bank account.

Can they send a check back to the customer and avoid recognizing this income in March?

* I say "supposed to" because this is an annual contractual payment from this customer that is due in April each year. I have the client checking the contract to see if there is any language prohibiting a prepayment. I am doubtful there is such language, though.

Constructive receipt. I don't see that returning the check is going to do you any good. Receipt isn't even constructive. It's actual.

Is the receipt in the nature of a deposit? Is your client contractually obligated to return the cash if he doesn't provide the goods/services?

It isn't 3/31 yet.

Have your client write a check back to the customer on Monday.
The customer can write you another check on Tuesday.

It isn't 3/31 yet.

LOL. Good point.

It isn't 3/31 yet.

LOL. Good point.

Admittedly, there are a host of other issues with this approach, but it would solve the issue.

OK. So there is nothing wrong with this. Just send the money back with a note saying "No thank you!".

They are not concerned about being able to re-collect this amount. Even in this new economy.

OK. So there is nothing wrong with this. Just send the money back with a note saying "No thank you!".

They are not concerned about being able to re-collect this amount. Even in this new economy.

There's no TAX rule that says you can't do this. From a business standpoint, there's some real risk if nothing more than the customer is probably planning to have that disbursement be reflected on their books. I would have a discussion with the customer before sending it back.

Yes. Good point. Customer goodwill needs to be considered.

For this situation, it is not applicable. This customer is a publicly-traded pharmaceutical company.