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March 24, 2023
Question

Losses from unpaid client account

  • March 24, 2023
  • 1 reply
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If a client owes a substantial sum of money, how can I enter that as a loss? Or do I just put their payments as a negative number?

1 reply

March 24, 2023

You do not enter money not paid to you as a loss if you are using the cash method of accounting, there is not an extra deduction for payments not received. You simply do not include it in your income received so you are not taxed on it.  If you took a deduction for it, then you would be double dipping.  

 

If you use the accrual method of accounting and account for income when it is billed to a client instead of when payments are received, then when the account becomes completely uncollectible, you can then take a deduction for bad debt if this income was previously reported on your taxes. If you do use the accrual method of accounting, then as you walk through the expense section of TurboTax,  you will be able to enter the bad debt. 

 

 

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