You are not automatically entitled to deduct a debt because the obligation has become worthless. To get a deduction, you must have suffered an economic loss. According to the IRS, you have a loss only when:
-you have already reported the money owed as income
-you paid out cash, or
-you made credit sales of inventory that were not paid for.
References:
https://smallbusiness.chron.com/can-claim-unpaid-wages-taxes-small-business-did-work-for-13716.html
https://ttlc.intuit.com/community/taxes/discussion/can-i-claim-services-render-but-customer-didn-t-p...
https://www.nolo.com/legal-encyclopedia/why-most-self-employed-service-providers-cant-deduct-bad-bus...
