Solved: On Schedule C, where do I enter a bad, noncollectable business debt?
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On Schedule C, where do I enter a bad, noncollectable business debt?

 
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Level 10

On Schedule C, where do I enter a bad, noncollectable business debt?

The response depends on your method of accounting for your Sch C activity:

  • If you are an accrual basis taxpayer, then you would record this on the "other expense" line and just title it bad debt.
  • If you are a cash basis taxpayer, then there is no bad debt because you have never picked this up into income
If you are talking about a loan that you made, then this will become more difficult, but once again you have two options:
  • If this was truly a business bad debt, related to your trade or business (loan not repaid OR no chance of repayment), then this would be entered on Sch C other expense line.  You have the burden of proof that this is a business bad debt and there are a number of hoops that you would need to hurdle to prove this.
  • If this was a nonbusiness bad debt (same loan not repaid), then this is a capital loss and entered on Sch D and the applicable form 8949.
As Opus noted, there are a number of facts that need to be understood to make a definitive response.  The above will give you some general guidelines. 
*A reminder that posts in a forum such as this do not constitute tax advice.*

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Level 15

On Schedule C, where do I enter a bad, noncollectable business debt?

More details may be needed but I don't think you do.  You can only deduct a debt if you previously reported the income.  If you did a job for someone and didn't get paid, then you already deducted your expenses.  Now you have no offsetting income, so by simply not having the income you aren't taxed on it.  You can't deduct the loss again.

If you made a loan using after-tax dollars that may be deductible.
*Answers are correct to the best of my ability but do not constitute legal or tax advice.*
**If a post answers your question, choose it by clicking on "Mark as Best Answer".**
Highlighted
Level 10

On Schedule C, where do I enter a bad, noncollectable business debt?

The response depends on your method of accounting for your Sch C activity:

  • If you are an accrual basis taxpayer, then you would record this on the "other expense" line and just title it bad debt.
  • If you are a cash basis taxpayer, then there is no bad debt because you have never picked this up into income
If you are talking about a loan that you made, then this will become more difficult, but once again you have two options:
  • If this was truly a business bad debt, related to your trade or business (loan not repaid OR no chance of repayment), then this would be entered on Sch C other expense line.  You have the burden of proof that this is a business bad debt and there are a number of hoops that you would need to hurdle to prove this.
  • If this was a nonbusiness bad debt (same loan not repaid), then this is a capital loss and entered on Sch D and the applicable form 8949.
As Opus noted, there are a number of facts that need to be understood to make a definitive response.  The above will give you some general guidelines. 
*A reminder that posts in a forum such as this do not constitute tax advice.*

View solution in original post

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New Member

On Schedule C, where do I enter a bad, noncollectable business debt?

I got my answer on my first search!  Nice HELP system!
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