According to the IRS, if someone owes you money and you reasonably expect to not be able to get it. you can take the bad debt deduction. There are requirements:
* You must have previously included the amount in your income or loaned out your cash. If you are a cash basis taxpayer, as most individuals are, you may not take a bad debt deduction for money you expected to receive but did not (for example, for money owed to you for services performed, or rent) because that amount was never included in your income. For a bad debt, you must show that there was an intention at the time of the transaction to make a loan and not a gift. If you lend money to a relative or friend with the understanding that it may not be repaid, it is considered a gift and not a loan.
* You must be able to show that you made a reasonable attempt to collect the debt. This doesn't mean you have to go to court, but you do have to document some effort on your part to get the money.
You can use Schedule D to claim the deduction. You can also get more info from IRS publication 550 (Investment income and expenses) or Publication 535 (Business expenses).
In addition to what Dark knight rides said, you must have a written contract that has a reasonable interest rate. Otherwise, it won't stand up to an audit.
by yankeeintexas 7 years ago
What is the best thing to do with your tax return?
by Sychophantastic 2 years ago
His plan streamlines the system so that there are only 3 brackets. The lower bracket pays 12%. The middle bracket pays 25%. The upper bracket pays 33%.If you're in the lower bracket, that's an increase from 10%.If you're in the middle bracket, that's an increase from 20%.If you're in the upper...
by lmarsh1203 6 years ago
Should I use my tax return to travel or be responsible?
by Dane Swanson 11 months ago
What is the difference between good debt and bad debt? Any examples?I realize good debt is reported to increase your net worth. Debt is debt, isn't it? Why call debt good when you don't have cash flow?
by Holle Abee 6 years ago
Biden averaged giving $369 per year to charity over the last decade. $369 on an income of $320,000?? That's sad. We make way less but donate more than that.http://www.usatoday.com/news/politics/e … cial_N.htm
by Alex J. Reissig 5 years ago
Would you support a flat 15% income tax?Would you support a flat 15% income tax in this country? Other than a personal deduction (possibly in the neighborhood of 25k per individual/50k per couple) there would be no deductions.
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