Home
>
Tax
>
Small Business Tax Deduction - Write-Off Bad Debts

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain from clients. If your small business doesn't have any such receivables, consider yourself lucky. For those small businesses that suffer from uncollected receivables, solace can be taken from the fact you can claim a tax deduction.

Bad Debt Tax Deduction

A small business can write-off bad debt losses if it meets nominal requirements. To claim such a tax deduction, the following must be shown:

A. The existence of a legal relationship between the small business and debtor;

B. The receivables are worthless; and

C. The small business suffered an actual loss.

Proving there is a legal relationship between the small business and debtor is fairly simple. You must simply show that the debtor has a legal obligation to make a payment. Most businesses issue invoices or sign contracts with debtors and these documents suffice to prove the legal relationship. If you are not putting your business relationships in writing, you should begin doing so immediately.

Proving receivables are worthless is slightly more complex. A small business is required to show that the debt has become both worthless and will remain so. You must also show that you took reasonable steps to collect the receivables, but you are not necessarily required to go to court to meet this requirement. A clear example where you would meet this requirement is if the debtor filed bankruptcy.

While proving that you suffered a loss may sound like the easiest requirement to meet, the issue is a bit more complicated. The Tax Code defines the loss as an amount that is included in your books as income, but is never collected. A classic example of such a situation would be a manufacturer that provides products to retailers on credit. The manufacturer can show a real loss if the retailer files bankruptcy. Unfortunately, there is almost no way to claim a loss if you provide hourly services and use a cash accounting method. The IRS does not consider the expenditure of time and effort to be a sustained economic loss.

Small businesses suffer all to often from uncollected receivables. If you failed to claim such losses as a tax deduction during your last three tax filing years, you should file amended tax returns to get a refund.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

bmw rental chicago Bensenville .. Lockport Chicago limo O’Hare

In The News:

Microsoft patches 12 critical flaws, but six have already been exploited by criminals. Kurt “CyberGuy" Knutsson says updating your system is only a short-term fix.

Tech expert Kurt “CyberGuy" Knutsson discusses how robots can milk, feed and clean cows on dairy farms, boosting efficiency and comfort.

Tech expert Kurt “CyberGuy" Knutsson says quantum internet ensures unhackable security and redefines online privacy and speed.

Kawasaki's CORLEO is a hydrogen-powered, AI-driven rideable robot. Tech expert Kurt “CyberGuy" Knutsson reports on this new way of thinking about off-road transportation.

The CyberGuy breaks down five mobile privacy terms that could make a difference when it comes to keeping your personal information safe.

A groundbreaking robot that's like a real-life Wall-E uses advanced artificial intelligence to replicate natural gestures and deliberate actions with striking accuracy.

If not properly managed, Windows Defender Application Control, a security feature with Windows, could be a potential security vulnerability.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

FlashBot Arm, a semi-humanoid robot, acts more like a human than traditional robots, and you may see it working at a restaurant, healthcare center or hotel.

There are multiple ways to find your missing Android phone after it goes missing. One method involves using a smartwatch to ping your phone.

The NeuroOne OneRF Ablation System is a new device with FDA-cleared technology designed for both diagnosing and treating neurological disorders in one procedure.

The CyberGuy provides tips to protect yourself from criminals who use various methods to make unauthorized transactions using your account information.

New drone technology maps land and water with stunning accuracy, giving researchers and conservationists a new way to understand our planet.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

X hit with massive data breach with 200 million records leaked, including emails. Tech expert Kurt “CyberGuy" Knutsson offers seven tips to help protect yourself.

Atlas robot by Boston Dynamics amazes tech expert Kurt “CyberGuy" Knutsson with its breakdancing moves.

Tech expert Kurt “CyberGuy" Knutsson talks about how Google kept Android SafetyCore details quiet until it scanned users' photos.

Hydrogen trucks debut in Georgia, sparking debates on costs and green freight gains. Kurt “CyberGuy" Knutsson comments on this promising chapter in green logistics evolution.

Tech expert Kurt “CyberGuy" Knutsson says ChatGPT learns from chats, but you should avoid sharing sensitive information to protect your privacy.

Beyond Aero's BYA-1: Hydrogen-electric jet with zero emissions, reduced costs, 2030 launch. Kurt “CyberGuy" Knutsson discusses a potential game changer in the evolution of air travel.

Kurt "CyberGuy" Knutsson explains how you can creatively repurpose your old unused Android devices, which are full of potential and hidden value.

Mech the super-humanoid robot can lift up to 132 pounds and is designed to tackle stressful and repetitive tasks that often lead to workplace injuries.

Double-clicking is something we all do, often without giving it a second thought. But it could be giving hackers permission to do something dangerous.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Kurt the CyberGuy offers some of his easy expert tips to free up storage space on your Android if your device is running short on storage.