Where do I put bad debts as a dution?

Forum|Forum|7 years ago
June 1, 2019
6 replies
40 views

where do I enter it on turbo tax?

TurboTax Premier Online

jtax

Level 10

is it a personal debt or a business debt?

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3huston29

Level 2

Business

DMarkM1

Level 15

You enter as "other miscellaneous expenses" in your business income interview. See the link below for the specific steps, if needed.

Be advised to be a business bad debt you must have included the income as taxable earlier. For example, if you did work for someone who never paid, then you haven't included the income. So there is nothing to exclude.

However, if you loaned money to someone and they never paid it back then you would have a bad debt.

Here is a link with further discussion on the subject.

[edited 2/3/2021 10:28am]

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jvjimboe1Author

Level 2

Where (How) do I enter a non business bad debt?

SweetieJean

Alumni - Champ

Please tell us the nature of the bad debt. Do you have a signed loan agreement? Taken any legal action?

jtax

Level 10

From https://www.irs.gov/taxtopics/tc453.html this is what you need to have to be able to take a non-business bad debt (fully worthless, able to show the debt was real, e.g. a promissory note, and steps taken to get paid, e.g. lawsuit, demand letters, etc.

Scroll down for how to enter in TT.

Nonbusiness bad debts must be totally worthless to be deductible. You can't deduct a partially worthless nonbusiness bad debt.

A debt becomes worthless when the surrounding facts and circumstances indicate there's no reasonable expectation of payment. To show that a debt is worthless, you must establish that you've taken reasonable steps to collect the debt. It's not necessary to go to court if you can show that a judgment from the court would be uncollectible. You may take the deduction only in the year the debt becomes worthless. You don't have to wait until a debt is due to determine that it's worthless.

Report a nonbusiness bad debt as a short-term capital loss on Form 8949 (PDF), 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 nonbusiness bad debt deduction requires a separate detailed statement attached to your return.

(emphasis added)

This previous answer describes how to enter a non-business bad debt in TT