kpankpow
Returning Member

Deductions & credits

Thanks for the response. I dug into it more, and found that in IRS Publication 550 there's a section for "insolvency of contractor" and it states that it can be deducted as non-business bad debt. To clarify my situation, the contractor was paid in advance for tasks, which I'd consider a deposit, and when they filed bankruptcy, we were not able to recover the deposit. Does any of this change your interpretation?