Bad Debt deduction or 1099-C?

Forum|Forum|1 year ago
October 25, 2024
1 reply
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I was wondering if you can help me with a tax question. I advanced a large commission to an agent a couple years ago and he was 1099'd for it from the company that he sold the product with. A couple months later the policy lapsed and the commissions were charged back to me. Now after a couple years I realize he will never pay me back what he owes. Would I just deduct this as a misc expense on my Schedule C or how do I handle it? I originally thought of a 1099-C but realized he was already sent a 1099 NEC a couple years ago for this case.

Thanks again for all your help!

Not A Product Question

Opus 17

Employee

So you are reporting a business, and you had a subcontractor?

It doesn't sound like a 1099-C issue because you didn't loan money, you paid a contracted fee that was not earned because the ultimate customer did not keep the policy long enough. You should have deducted the chargebacks as business expenses in the year they occurred (because you had to repay the ultimate provider of the policy, right?), regardless of whether you got paid pack (and the pay back, if it ever comes, would be a new expense). So technically, I think you should amend your prior year return. If you took the charge backs this year, it would probably be a harmless error, but not technically correct in my opinion.

marhughesAuthor

Where would I take the deduction on my Schedule C? As a misc business expense? What would I put down for the details? Thanks for your help!

Mark

Opus 17

Employee

@marhughes wrote:

Where would I take the deduction on my Schedule C? As a misc business expense? What would I put down for the details? Thanks for your help!

Mark

Yes, I think misc expense is fine, I would call it charge back or commission chargeback or something similar. I don;t think it's an unusual situation.