topic Re: bad debt write off in Get your taxes done using TurboTax

bad debt write off

ray smith — Sun, 02 May 2021 19:38:24 GMT

How do I write off a bad debt in turbo tax. I am looking for the process to enter the form.

Re: bad debt write off

SweetieJean — Sun, 02 May 2021 19:43:45 GMT

Exactly what type of bad debt, and was it personal or business?

Re: bad debt write off

patdrouhard — Sun, 23 Jan 2022 23:08:04 GMT

How do I write off a bad debt?

Re: bad debt write off

JohnW152 — Sun, 23 Jan 2022 23:24:50 GMT

@patdrouhard

Please clarify – are you asking where to claim a bad debt for a loan that you've made?

If that's the question, please see the TurboTax Help article How to Report Non-Business Bad Debt on a Tax Return for entry guidance and more information.

If that’s not the question, please reply, and also state whether you’re using TurboTax Online or Desktop, and which version.

Re: bad debt write off

patdrouhard — Mon, 24 Jan 2022 02:03:12 GMT

yes, I am asking where and how to claim a bad debt for a loan that I made. When I go to "How to Report Non-Business Bad Debt on a tax return," my Turbo Tax takes me through a stock sale process (Turbo Tax Desktop). Also, how do I complete form 8949 on my desktop program (Home and Business edition).

Re: bad debt write off

DawnC — Mon, 24 Jan 2022 02:47:41 GMT

You were in the correct spot - Investment Income, Stocks, Mutual Funds, Bonds, Other. When you go through that section and answer the questions, TurboTax automatically creates Form 8949 and includes it with your tax return. Answer NO to the 'Did you receive a 1099-B for this sale'. The cost (basis) is the amount of your worthless loan and the proceeds are what you have received on the loan, $0. The description should have the name of the debtor/loan info. Date Sold is the day it become worthless, must be in 2021 to file on this year's return.

Be sure to mark the Holding Period as Box C - SHORT TERM, see image below

The debt must have been a bona fide loan—you gave the money with every expectation of being repaid. If you charged interest, and the borrower signed a promissory note, this provides a good indication that you expected to get your money back. Otherwise, the IRS might consider the exchange to be a gift, particularly if the borrower is a friend or a family member. And gifts aren't tax deductible.

The debt must be worthless

The unpaid debt must be 100% worthless before you can deduct it. There must be no chance that the borrower can or will ever pay you back the amount of the loan. It is important to make a documented effort to collect your money with:

Letters
Invoices
Phone calls

Generally, you can't take a deduction for a bad debt from your regular income, at least not right away. It's a short-term capital loss, so you must first deduct it from any short-term capital gains you have before deducting it from long-term capital gains. Finally, you can deduct up to $3,000 of any remaining balance from other income. If a balance still remains, you can carry it over to subsequent years.

The IRS also requires that you attach a bad-debt statement to your tax return, explaining the details of the loan you made. This can prevent e-filing as attachments cannot be e-filed with your return.

@patdrouhard

Re: bad debt write off

frapp49 — Tue, 15 Feb 2022 01:05:27 GMT

student loans

Re: bad debt write off

ThomasM125 — Tue, 15 Feb 2022 01:30:15 GMT

@frapp49 If you mean you had a student loan that was cancelled, it will be reported to you on a form 1099-C. You enter that in TurboTax in the Wages and Income Section, then Less Common Income, then Miscellaneous Income, 1099-A, 1099-C. Choose the Cancellation of debt (Form 1099-C) option and then follow the instructions.

Re: bad debt write off

Duke2 — Wed, 16 Feb 2022 02:11:41 GMT

business. Client has owed me for 2 yrs

Re: bad debt write off

Duke2 — Wed, 16 Feb 2022 02:13:36 GMT

No its not a loan. Client was invoiced for work I preformed and was never paid for.

Re: bad debt write off

Duke2 — Wed, 16 Feb 2022 02:14:41 GMT

Turbo Tax and Quickbooks Online. I want to write it off my taxes

Re: bad debt write off

Duke2 — Wed, 16 Feb 2022 02:18:28 GMT

Business, A client owes me for unpaid invoices.

Re: bad debt write off

AmyC — Wed, 16 Feb 2022 03:05:06 GMT

If you are a cash basis taxpayer, you don' t. If you are accrual based taxpayer that claimed the income 2 years ago, then you would take it back off provided you can prove your collection efforts.

See:

Re: bad debt write off

Swishman4619 — Fri, 08 Mar 2024 18:41:19 GMT

TURBO TAX WILL NOT ALLOW ME TO ENTER THE BAD DEBT WRITE OFF ON A COMPANY THAT TOOK MY DEPOSIT TO INSTALL A FENCE THEN WENT BANKREUP!

Re: bad debt write off

Swishman4619 — Fri, 08 Mar 2024 18:42:07 GMT

IT WAS PERSONAL

Re: bad debt write off

AmyC — Fri, 08 Mar 2024 20:26:56 GMT

From Topic No. 453, Bad Debt Deduction:

If someone owes you money that you can't collect, you may have a bad debt. For a discussion of what constitutes a valid debt, refer to Publication 550, Investment Income and Expenses and Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C). Generally, to deduct a bad debt, you must have previously included the amount in your income or loaned out your cash. If you're a cash method taxpayer (most individuals are), you generally can't take a bad debt deduction for unpaid salaries, wages, rents, fees, interests, dividends, and similar items of taxable income. For a bad debt, you must show that at the time of the transaction you intended to make a loan and not a gift.

Paying someone to install a fence is not a loan. Here are some helpful tips of what to do when a contractor doesn't finish the job.

@Swishman4619

Re: bad debt write off

jayjay3cmu — Mon, 15 Apr 2024 21:43:12 GMT

Where do I claim loss for unpaid consulting fees?

Re: bad debt write off

jayjay3cmu — Mon, 15 Apr 2024 21:44:59 GMT

My customer did not pay me in full on my 1099 NEC. I have no expectation of payment and would like to claim the loss.

Re: bad debt write off

jayjay3cmu — Mon, 15 Apr 2024 21:46:38 GMT

I am using Home and Business desktop version and wish to claim loss on uncollectable consulting fees which were not paid on my 1099 NEC. Thanks!

Re: bad debt write off

LeticiaF1 — Mon, 15 Apr 2024 22:46:32 GMT

Per IRS Topic no. 453 regarding Bad debt deduction, if you're a cash method taxpayer (most individuals are), you generally can't take a bad debt deduction for unpaid fees. If you received a Form 1099-NEC showing a larger amount than what you were paid, you could contact the company or individual that issued it and have them correct it.

@jayjay3cmu