How can I enter all the necessary info in TurboTax Premier (Desktop version)?

[john9yao]

I loaned over 20K to somebody a few years ago.  I have not been able to get the money back.  I'd like to write it off as  a Nonbusiness Bad Debt.
How can I enter all the necessary info in TurboTax Premier (Desktop version)?

[Bsch4477]

Discussed here. 

https://turbotax.intuit.com/tax-tips/irs-tax-return/how-to-report-non-business-bad-debt-on-a-tax-ret...

[PattiF]

You will be able to enter this into your tax return as long as the unpaid e=debt is worthless. You will need to document your efforts to collect the money by letter or invoices.

You can enter the bad debt on Form 8949. You will not be able to deduct the entire amount in the first year. This TurboTax Tax Tip has the details on handling a bad debt in your taxes.

[VolvoGirl · Accepted solution]

I have some old notes.  See if this works or gets you close.  It might have changed.  I have the Desktop program I will double check it.

Enter a Bad Debt under
Federal Taxes (or Personal for Home & Business)
Wages and Income
Then scroll down to Investment Income
Then Stocks, Mutual Funds, Bonds, Other - Click Start or Revisit
Did you sell any Investments or Other? - YES
Did you Receive a 1099B? - NO Continue
Fill out the screens. For What kind of Investment pick OTHER

Then Stocks, Mutual Funds, Bonds, Other - Click Start or Update

If you see a screen that says….Did you have any of these Investment Sales say YES
If you have a screen showing your Investment Sales Summary - click on + Add More Sales
Next screen should ask Did you get a 1099B - Say NO
Next screen is Choose the type of investment you sold - Pick the Second One Uncollectable Debt

You can only deduct up to 3,000 (1,500 MFS) loss per year after any gains you have. The rest you will have to carryover until it is used up.

[john9yao]

Thank you very much for the useful info.

[john9yao]

Hi VolvoGirl,

Thank you so much for your help.  I followed your steps, and the numbers got into Form 8949 nicely.   One more question -

How do I put in a bad-debt statement required by IRS?

(The IRS also requires that you attach a bad-debt statement to your tax return, explaining the details of the loan you made. )

Thanks again, -John

[DianeW777]

My advice would be to send the Form 8949 or Schedule D and include the bad debt statement with that form if you already used e-file to send your tax return.  It must be accepted before you mail, but it should be mailed within 3 days of acceptance by the IRS.

If you are e-filing your tax return, then mail your statements (Schedule D, Form 8949 if applicable, bad debt documents) along with Form 8453 to: 

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

If you need a blank Form 8453, you can download this pdf, enter your address information and check the box for Form 8949 (this form is really just a cover sheet)

If you did not e-file then you should print your return and mail it along with the bad debt document(s).

[john9yao]

Thank you, DianeW777.

The Form 8453 Says "Form 8949, Sales and Other Dispositions of Capital Assets (or a statement with the same information), if you elect not to report your transactions electronically on Form 8949".  But, my 8949 is already included in the e-file.  

Do I file Form 8949 twice, once in efile and once paper file with Form 8453?

Thanks again, -John

[DianeW777]

Yes, include Form 8949 and your bad debt statement with Form 8453 when you summarize transactions. Be sure you keep a copy of all documents with your tax file.

[908807]

Where do I list my license code

[908807]

where do I put my license code?

[DoninGA]

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@908807 wrote:

Where do I list my license code

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The license code will be entered during the installation of the TurboTax software on your personal computer.

[Swishman4619]

I am using TurboTax premier  (CD), but it will not allow me to input a $2,800 nonbusiness completely worthless bad debt? 

Why?

Dave

[GeorgeM777]

You report a non-business bad debt the same way you report a short-term capital loss.   In TurboTax CD, you enter your bad debt information in the Investment Income section under the Wages & Income tab.  However, according to IRS guidance, you must also attach a detailed statement to your return explaining the facts and circumstances relating to your bad debt.  Because you have to include a detailed statement with your return, you will have to paper mail your return.  You will not be able to upload your detailed statement into TurboTax.  

Here is the IRS guidance on reporting a non-business bad debt.

Report a nonbusiness bad debt as a short-term capital loss on Form 8949, Sales and Other Dispositions of Capital Assets, Part 1, line 1. Enter the name of the debtor and "bad debt statement attached" in column (a). Enter your basis in the bad debt in column (e) and enter zero in column (d). Use a separate line for each bad debt. It's subject to the capital loss limitations. A deduction for a nonbusiness bad debt requires a separate detailed statement attached to your return. The statement must contain: a description of the debt, including the amount and the date it became due; the name of the debtor, and any business or family relationship between you and the debtor; the efforts you made to collect the debt; and why you decided the debt was worthless.

Bad Debt Deduction

@Swishman4619