J.K. Lasser's Small Business Taxes 2018

CHAPTER 11Bad Debts

1. Bad Debts in General
2. Collection of Bad Debts
3. Business versus Nonbusiness Bad Debts
4. Loans by Shareholder-Employees
5. Guarantees That Result in Bad Debts
6. Special Rules for Accrual Taxpayers
7. Reporting Bad Debts on the Tax Return
8. Collection Strategies

Alert

At the time this book was completed, Congress was considering important tax changes that could affect 2017 tax returns and planning for 2018. Check the online Supplement in February 2018 at www.jklasser.com or www.barbaraweltman.com to see what changes have been enacted and when they are effective.

No one thinks that the loans they make to others will go unpaid; otherwise, such loans would not be made in the first place. You never expect that the check you've accepted as payment for the goods or services you've provided will bounce or that you'll have a chargeback for a credit card payment, but unfortunately, these are common occurrences (especially in tough economic times). No matter how careful you are, you may get stiffed! If, in the course of your business, you lend money or extend credit for your goods and services but fail to receive payment, you can take some comfort in the tax treatment for these transactions gone sour. You may be able to deduct your loss as a bad debt.

For further information about deducting bad debts, see IRS Publication 535, Business Expenses.

Bad Debts in General

If you cannot collect money that is owed to you in your business, your loss may be deductible. You must ...