Clarity on Bad Business Debts Deductions for a 1099 Independent Contractor

[o0lunatik]

Hi Community. I am hoping for some clarity on a bad business debt deduction. My wife's a therapist, who worked as a 1099 contractor for a business.  The business was in charged of medical billings and collections, and my wife gets a cut of the income. The business filed for bankruptcy and is not bankrupted. My wife was owed approximately $5,000 from services performed that was billed and collected from the business. My wife did not get paid what was owed and the business took this as income.

Question is, can my wife take this as some form of bad business debt and in what aspect of schedule c? Much appreciated.

[o0lunatik]

Typo Correction:   The business filed for bankruptcy and is "now" bankrupted.

[ThomasM125]

No, unfortunately she cannot deduct the value of her services. Only things paid for with money can be deducted.

[printerboy11]

What if the company is not bankrupt ? Can she put in a deduction for a bad debt?

[Vanessa A]

If there is any chance of collecting the money, you cannot claim the deduction for bad debt.  So one must first exhaust all collection efforts prior to claiming this deduction.  The difference between a company being bankrupt and not, is that if it is bankrupt, you cannot collect.  If it is not, then you do have to try and if you did try and can't, then you must state what all you did to attempt to collect.