Solved: Turbotax Premier 2020 can't enter Uncollectible De...
Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
TurboTax has you covered during Covid. Get the latest stimulus info here.
cancel
Showing results for 
Search instead for 
Did you mean: 
tenyearuser
Level 1

Turbotax Premier 2020 can't enter Uncollectible Debt/Nonbusiness Bad Debt

Is this functionality removed or moved in TT 2020? 

As background, I have investment in a crowdfunded real-estate hard money lending website that is deemed a total loss. I have documents attesting to the debt recovery process and how it becomes totally worthless. I have one such bad debt in 2019, and now another one in 2020. Somehow I cannot seem to be able to do the following in TT Premier 2020 and there seems to be a change in the software. 

 

TT Premier 2019:

I'm looking at my 2019 side by side with the 2020. In 2019, I can go Wages &Income -> choose what I work on -> Stocks, Mutual Funds, Bonds, Other [Update] -> Add more Sales -> say No to Did you get a 1099-B -> "Choose the type of investment you sold," which has a long list of types, the second is "Uncollectible Debt (Nonbusiness Bad Debt). 

This option worked well for me in 2019 as I just now went back to get it verified. 

 

TT Premier 2020: when I tried to recreate the above, I cannot seem to be able to get to the choose the type of investment screen. When I say No to Did you get a 1099-B, I get a "Tell us about this sale" screen asking me to enter stock sale information. 

 

Anyone knows how to enter nonbusiness bad debt in TT Premier 2020? Thank you. All products are download version installed on Windows.

 

 

1 Best answer

Accepted Solutions
ToddL99
Employee Tax Expert

Turbotax Premier 2020 can't enter Uncollectible Debt/Nonbusiness Bad Debt

There is a Nonbusiness Bad Debt interview on the Other Deductions and Credits menu of Federal Taxes > Deduction and Credits. The attached screenshot shows where the interview is found (also applicable to TurboTax Premier).

 

Completing the Nonbusiness Bad Debt interview will generate a Form 8949, necessary to report the loss. There are specific questions that must be answered in order to qualify the loss as a deduction.

  • A bad debt is when someone owes you money you cannot collect. You can claim a bad debt ONLY if you have previously reported the value of the debt as income you received.
  • However, if you loaned money to someone that you had previously included in your income and the person did not pay you back, then you have a bad debt.
  • To be deductible, non-business bad debts must be totally worthless. The deduction can be taken in the year the debt becomes worthless. Non-business bad debts are always a short-term loss.

Here are some other things to consider:

  • You must be able to show the debt was legally enforceable and you exhausted all reasonable means of recovering the debt.
  •  Loans which are forgiven are not bad debts.
  •  Loan guarantees, where you pay another person's debt, are not a bad debt unless your reason for the guarantee was to protect your investment or to make a profit on the associated transaction.
  • You cannot take a non-business bad debt deduction for amounts owed to you by a political party or other organization that accepts contributions or spends money to influence elections.
  • If you pay off a mechanic's lien or supplier's lien to protect your property from foreclosure and cannot recover the debt from the person for whom the liens were filed (say, a contractor), you have a non-business bad debt.
  • You can take a bad debt deduction for the amount you deposit with a contractor if the contractor becomes insolvent and you are unable to recover your deposit.

How to Report Non-Business Bad Debt on a Tax Return

 

 

 

View solution in original post

3 Replies
ToddL99
Employee Tax Expert

Turbotax Premier 2020 can't enter Uncollectible Debt/Nonbusiness Bad Debt

There is a Nonbusiness Bad Debt interview on the Other Deductions and Credits menu of Federal Taxes > Deduction and Credits. The attached screenshot shows where the interview is found (also applicable to TurboTax Premier).

 

Completing the Nonbusiness Bad Debt interview will generate a Form 8949, necessary to report the loss. There are specific questions that must be answered in order to qualify the loss as a deduction.

  • A bad debt is when someone owes you money you cannot collect. You can claim a bad debt ONLY if you have previously reported the value of the debt as income you received.
  • However, if you loaned money to someone that you had previously included in your income and the person did not pay you back, then you have a bad debt.
  • To be deductible, non-business bad debts must be totally worthless. The deduction can be taken in the year the debt becomes worthless. Non-business bad debts are always a short-term loss.

Here are some other things to consider:

  • You must be able to show the debt was legally enforceable and you exhausted all reasonable means of recovering the debt.
  •  Loans which are forgiven are not bad debts.
  •  Loan guarantees, where you pay another person's debt, are not a bad debt unless your reason for the guarantee was to protect your investment or to make a profit on the associated transaction.
  • You cannot take a non-business bad debt deduction for amounts owed to you by a political party or other organization that accepts contributions or spends money to influence elections.
  • If you pay off a mechanic's lien or supplier's lien to protect your property from foreclosure and cannot recover the debt from the person for whom the liens were filed (say, a contractor), you have a non-business bad debt.
  • You can take a bad debt deduction for the amount you deposit with a contractor if the contractor becomes insolvent and you are unable to recover your deposit.

How to Report Non-Business Bad Debt on a Tax Return

 

 

 

View solution in original post

KG54
New Member

Turbotax Premier 2020 can't enter Uncollectible Debt/Nonbusiness Bad Debt

I am having difficulty understanding the nonbusiness bad debt explanation.  It says you can ONLY claim it if you had previously claimed the value as income.  How can money you loan someone be considered and or claimed to be income.  Where would this claim be made?  The money from which this personal loan was made was from income over a number of years.  It was in my savings account prior to my giving the loan to the debtor.

DianeW777
Expert Alumni

Turbotax Premier 2020 can't enter Uncollectible Debt/Nonbusiness Bad Debt

A loan issue by a taxpayer is not the same as claiming a bad debt for anticipated income. 

 

It is assumed that if you use your own money to provide a loan to someone or some entity, that it was at some point taxable income to you over the years. You should have a debt instrument (a note or repayment obligation statement) showing proof of the contract and have taken all steps to try to collect.

 

This is not the same as money you expected to receive but never did and as such never reported it as taxable income.

  • Examples: Rental income when the tenant didn't pay their rent (all expenses for maintaining the rental unit were expensed). OR farm crop income from crops destroyed by natural events such as flooding or draught (all the expense for the seed, planting, fertilizer, equipment has already been expensed).
Dynamic AdsDynamic Ads
v
Privacy Settings