Discussion:Bad Debt & Self-employed

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Discussion Forum Index --> Tax Questions --> Bad Debt & Self-employed

Focus246 (talk|edits) said:

19 January 2007
If a self-employed contractor completes a job and his customer does not pay, where on Schedule C can this bad debt be reported? I have not encountered this before.


Deback (talk|edits) said:

January 19, 2007
Nowhere on the Sch C, if he is on the cash basis and has never included the income in gross income. Bad debts can only be deducted by businesses that have previously included the income in their gross income (on the accrual basis). However, his costs for materials, vehicle expense, labor, etc. for that job can be deducted on the normal lines on Sch C.

Death&Taxes (talk|edits) said:

19 January 2007
I think bad debt treatment for cash basis taxpayers is most often asked question #3 during preparation, behind 'Mom gave me 12,000; do I pay tax on it"? and "I donated my time to my church, how much can I deduct? The variant I hear on the bad debt is 'lost rent' when an apartment is vacant.

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