Tax Deduction for Unpaid Services?

[JohnTC1]

In 2018, the company I was working for as an independent contractor disappeared.  I was owed half a year's pay for work I performed.   After filing a lawsuit that has gone on for four years, I learned that there is no money for the settlement, and I am out that money.   Is the amount I am owed deductible for the 2022 tax year?

[KarenL]

Unfortunately, it's not a deduction for you unless you filed taxes on an "accrual basis" (as income was earned rather than received).   Most tax filers use what is called "cash basis" (reporting the income as it's received). The good news, if you have a cash basis business, is that you will not owe taxes on that income since it wasn't received to report.