You report a non-business bad debt the same way you report a short-term capital loss. In TurboTax CD, you enter your bad debt information in the Investment Income section under the Wages & Income tab. However, according to IRS guidance, you must also attach a detailed statement to your return explaining the facts and circumstances relating to your bad debt. Because you have to include a detailed statement with your return, you will have to paper mail your return. You will not be able to upload your detailed statement into TurboTax.
Here is the IRS guidance on reporting a non-business bad debt.
Report a nonbusiness bad debt as a short-term capital loss on Form 8949, Sales and Other Dispositions of Capital Assets, Part 1, line 1. Enter the name of the debtor and "bad debt statement attached" in column (a). Enter your basis in the bad debt in column (e) and enter zero in column (d). Use a separate line for each bad debt. It's subject to the capital loss limitations. A deduction for a nonbusiness bad debt requires a separate detailed statement attached to your return. The statement must contain: a description of the debt, including the amount and the date it became due; the name of the debtor, and any business or family relationship between you and the debtor; the efforts you made to collect the debt; and why you decided the debt was worthless.
Bad Debt Deduction
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