I will be submitting a "bad debt statement" to the IRS as an attachment to my return. Can I still e-file or do I need to file a paper return?

[DoninGA · Accepted solution]

Attachments cannot be used with an e-filed tax return.  You would have to print and mail the tax return if you a required to provide a statement to the IRS.

If the IRS is not requiring an explanation for the non-business bad debt, there is no reason for you to provide one.  If the IRS questions the debt then they will send you a letter in the mail requiring proof of the short term capital loss.