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If my small business writes off a debt as bad debt, can I still try to collect?
Minneapolis, MN
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Posted about 1 year ago in Debt Collection
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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.
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Answers (2)
Alec Scott Rose
This attorney is licensed in California.
Posted about 1 year ago.
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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
Okorie Okorocha
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