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If my small business writes off a debt as bad debt, can I still try to collect?I have a money judgment against an individual and I don't expect to collect anytime soon as the debtor doesn't have any money right now. I'd like to write the debt off on my taxes as bad debt. As I understand it, this involves sending the debtor a 1099-C as forgiven debt is considered income by the IRS. Does writing off the debt for tax purposes and sending the debtor a 1099-C prevent from forever chasing the defendant for money? Do I lose any right to collect it? My CPA can't answer me on this one...Thanks for your input. Attorney answers (2)
Reputation Level 15
Answered almost 4 years ago.
Violent Crime Lawyer in Santa Monica, CA.
No, but if you have written off the debt, and you eventually collect it, you both have to report the income, and report the reversal of the loss. The IRS has plenty of helpful pamphlets and publications for individual and business taxpayers at www.irs.gov
2 people marked this answer as good
Nicholas Chukwuemeka Okorocha, licensed in California
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Reputation Level 19
Answered almost 4 years ago.
DUI / DWI Attorney in Los Angeles, CA.
I agree with Alec. I would look at the debtor and see if you want to write it off or not. I am not sure you would want to write it off and then go through the mess of collecting it, unless you collect it piecemeal and all that effort, and paperwork, etc.
2 people marked this answer as good
Nicholas Chukwuemeka Okorocha, licensed in California
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