Tax Relief: Bad Debt In Business Is Tax Deductible

All businesses experience this, it happens to virtually everyone, from small to medium and large business. Bad debt applies when a customer does not pay you and you need to know that in compensation for this you are allowed some tax relief in the form of a tax deduction.

Again, as with everything involved with the IRS, things are not always as simple as they appear. Whether or not you can claim tax relief on bad debt will depend on how you have accounted for your income in your previous years’ tax return. If you included the amount due from the customer in your last years return as income, it will be likely that you can claim it in the following years return as deductible. If you haven’t recorded the debt as income, then no deduction can be claimed.


It is not necessary to go to court to prove that a bad debt is not-collectable. However, you can only make the bad debt tax deductible in the year that it becomes worthless. Again if you overlook the bad debt in the year that it becomes worthless and don’t claim tax relief, this is not the end of the world. For worthless bad debt, you can file a claim for a deduction for up to seven years after the date of an original tax return, to file an amended tax return.

There are additional rules that apply and not all of these are apparent; but, it is our business to assist with matters such as these, when tax deductible situations for bad debt become more complicated.

By: N.F.Centeno

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Do you also want to learn about getting rid of your IRS and/or state tax problems? Visit us at our website for money saving Tax Debt Tips and Strategies. www.LimonWhitaker.com Over the past few years N. F. Centeno and partners have helped thousands of people with their IRS and state tax problems. We'll Handle The IRS For You If you have urgent questions or concerns about your tax debt, we are available to help you at 800.993.1249 Monday to Friday 6:00AM to 8:00PM Pacific Time.

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