Small Business Tax Deduction - Write-Off Bad Debts
Practically every small business has receivables that it cannot obtain from clients. If your small business doesn't have any such receivables, consider yourself lucky. For those small businesses that suffer from uncollected receivables, solace can be taken from the fact you can claim a tax deduction.
Bad Debt Tax Deduction
A small business can write-off bad debt losses if it meets nominal requirements. To claim such a tax deduction, the following must be shown:
A. The existence of a legal relationship between the small business and debtor;
B. The receivables are worthless; and
C. The small business suffered an actual loss.
Proving there is a legal relationship between the small business and debtor is fairly simple. You must simply show that the debtor has a legal obligation to make a payment. Most businesses issue invoices or sign contracts with debtors and these documents suffice to prove the legal relationship. If you are not putting your business relationships in writing, you should begin doing so immediately.
Proving receivables are worthless is slightly more complex. A small business is required to show that the debt has become both worthless and will remain so. You must also show that you took reasonable steps to collect the receivables, but you are not necessarily required to go to court to meet this requirement. A clear example where you would meet this requirement is if the debtor filed bankruptcy.
While proving that you suffered a loss may sound like the easiest requirement to meet, the issue is a bit more complicated. The Tax Code defines the loss as an amount that is included in your books as income, but is never collected. A classic example of such a situation would be a manufacturer that provides products to retailers on credit. The manufacturer can show a real loss if the retailer files bankruptcy. Unfortunately, there is almost no way to claim a loss if you provide hourly services and use a cash accounting method. The IRS does not consider the expenditure of time and effort to be a sustained economic loss.
Small businesses suffer all to often from uncollected receivables. If you failed to claim such losses as a tax deduction during your last three tax filing years, you should file amended tax returns to get a refund.
Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.
Warning: include(inc/ads-body.inc) [function.include]: failed to open stream: No such file or directory in /home/accounta/public_html/34945_business_personal_taxes.php on line 59
Warning: include(inc/ads-body.inc) [function.include]: failed to open stream: No such file or directory in /home/accounta/public_html/34945_business_personal_taxes.php on line 59
Warning: include() [function.include]: Failed opening 'inc/ads-body.inc' for inclusion (include_path='.:/usr/lib/php:/usr/local/lib/php') in /home/accounta/public_html/34945_business_personal_taxes.php on line 59
MORE RESOURCES:
 KOMO News | Wash. lawmakers: Tax compromise could be possible BusinessWeek Legislative leaders were more optimistic Thursday that compromise might be possible on an $800 million tax package to help bridge ... Lawmakers back, still stuck on taxes Republican lawmakers frustrated at slow pace of special session |
Tax officials find bonanza of offshore income Globe and Mail 19, 2010 9:50AM EDT Crunch time for tax filers is still weeks away, but Canada Revenue Agency can already boast that it has unearthed six times more ... This could be the year for a nice, big refund from Ottawa |
Credit Suisse clients, staff face German tax probe Reuters DUESSELDORF, Germany, March 19 (Reuters) - German prosecutors have launched 1100 tax evasion probes against clients of Swiss bank Credit Suisse (CSGN. ... |
 Global Toronto | 4.5% property tax hike proposed for Regina CBC.ca (CBC) The City of Regina portion of property taxes could go up 4.5 per cent, a budget proposal released Friday says. That's the amount the city says it ... Regina residents facing biggest tax hike since Mayor Pat Fiacco took office |
Mayors fear province will create new tax for TransLink Globe and Mail Mr. Trasolini said provincial representatives have been saying for years that they believed the region could put more into transit costs from property taxes ... Bond, mayors head talk TransLink |
 The Guardian (blog) | Mandelson denies post-election tax rises planned BBC News Lord Mandelson has sparked speculation Labour will put taxes up again if they win the election after saying economic conditions could make it "necessary". ... Labour warns of more tax rises next year Mandelson opens door to more tax rises We may raise taxes, says Lord Mandelson |
Regional District taxes on the way up Canada.com Tax increases are definitely on the way for property owners throughout in the Comox Valley. ... |
No tax increase, but schools would take a hit in latest Kansas budget plan Kansas City Star TOPEKA | The House Appropriations Committee passed a $5.1 billion budget proposal Thursday that includes no tax increases and would ... Kansas legislators push budget, stall on taxes House Leaders Say No New Taxes Kansas tax panel offers balanced budget, no new taxes |
 NY1 | Daw: Americans in Canada eligible for US tax refunds Toronto Star Filing a 2009 US income tax return by June 15 could qualify you to collect up to $400 from Uncle Sam. If you have a spouse with a US social security number ... Tax Tip: 10 facts about claiming the Child Tax Credit Income tax deadline looms in April Receive an IRS income tax credit for 2009 and reduce your taxes – IRS income ... |
 CBC.ca | Don't tax iPods Calgary Herald Angus's bill would extend Canada's existing private copying levy -- which adds a small tax to all blank media, such as CDs -- to devices that can play ... MP3 tax bill opposed by Conservatives NDP's Angus unveils copyright bill |
Tax Trap #5 -- Ignoring The IRS (and the 5 best ways to contact them!)
We all love to criticize the IRS, don't we? And I'm just as guilty as anyone. It's easy to ridicule a huge organization of government bureaucrats who often seem to be Public Enemy #1.
State Tax Information
All states also have their own tax system. Typically there is a tax on real estate, and there may be additional income taxes, sales taxes, and excise taxes.
Get Uncle Sam To Pay $36,000 For Your Childs Education!
Let's assume that you would like to begin saving for your children's education fund. At the end of each year, for the next 8 years, you will contribute $2,000 into a Coverdell Education Savings Account (Education IRA), using your after-tax dollars.
Tax Tips for Home-Based Business Owners
As tax time approaches, many home-based business owners begin completing their forms or paying their accountants with trepidation. This nervousness comes from two sources: a fear of being audited and a fear of having to pay a lot.
Anticipating Your IRS Refund Can Cost You Plenty
While accountants are reaching for aspirin, millions of Americans are reaching for some fast cash this tax season. Unfortunately, those who reach for fast cash in the form of a "refund anticipation loan" are getting hit with interest rates and fees that are out of this world.
How to Check the Status of Your Tax Refund Online
So, you were pleasantly surprised to learn that you are getting a refund on your taxes. Congratulations! The question for most taxpayers expecting a return is, "Where is my refund?"Check Your Refund Status OnlineThe easiest way to check on your refund is to ask the IRS through IRS.
Deducting Points On Home Refinances
Deduction of Refinance PointsAny points that you pay in the refinancing of your residence are tax deductible over the length of the loan in question. The deduction is allowable only if the residence is your primary home and the new mortgage replaces a previous one and/or is used to improve the residence.
Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)
Background issues of access to recordsTo assess the records at hosted remote retained out of the jurisdiction of Pakistan root many legal issues which are needed to be addressed. Hereinafter there is description of the emerging legal issue of access to e-records.
Business Tax Deductions
As we enter mid-March, taxpayers begin to become very interested in deductions. Following are a few that you may be entitled to claim.
Hurricane Katrina - How To Use Your Business Loss To Get A Refund on 2004 Taxes
With the massive losses caused by Katrina, the economy of the Gulf Coast region is in extremely bad shape. Fortunately, there is a quirk in the tax code that can help you generate a large refund from your 2004 taxes.
Taxation of Forgiven Debt: The 1099C & You
Often people fall on hard times and stop paying on credit cards. After a while the account may go to an outside debt collector who might offer a settlement of the debt for 30-40% of theoriginal sum.
Euro Tax Haven Threat
Media reporting of a new EU savings tax directive has left many people wondering whether European tax havens could soon become obselete.The July directive requires banks throughout Europe, including low and no tax areas such as Gibraltar, Monaco, Malta and Andorra, to disclose bank account owner information to their home country's tax authority.
A Taxing Investment
April 15 - The most dreaded day of the year is right around the corner. Are you ready? Some of the most neglected (and misunderstood) tax issues are those related to your investments.
Tax Help Secret: Avoiding the Entreprenuers Curse
Your days as an entrepreneur and businessperson are consumed with one primary activity; making money. Whether you think in terms of growing your business, getting the word out there, or some fancy new marketing technique, your days and weeks and months in business are focused on that one group of activities.
Furnishing Evidence in E-Tax Compliance
Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This concept is recognised in all tax statutes, which sets out taxpayers' primary obligations, and clearly spells out that taxpayers are required to determine the amount of tax payable correctly and to pay it on time.
Tax Trap #4 -- The Quagmire of Depreciation
If you are a Small Business Owner or Self-Employed Person, there's one especially lucrative tax break that not only puts money in your pocket, it also makes the filing of your business tax return much simpler.What am I talking about? It's called the Section 179 deduction, and if there's one tax break you need to understand, this is it.
Tax Trap #2 -- Double Taxation: Isnt Once Enough?
Have you been thinking about incorporating your small business or self-employment activity? The advantages are many!For starters, you'll be protecting yourself and your family from the possible of a business ending lawsuit. Forming a corporation is Step One on the path known as "Asset Protection" -- you are moving from the world of unlimited liability to the world of limited liability.
Tax Strategy - Let Washington Pay for Your Corvette, Porsche, or Air Plane
Deducting Your Auto ExpensesAuto deductions are a very complex topic. So, to clarify, we are not going to attempt to cover all of the intricacies of the subject.
Are You Overpaying Taxes If You Use Tax Preparation Software?
For many business owners the answer to this quandary is tax preparation software. Fill out a fairly simple interview, click "print" and out comes a completed return that will pass muster with the IRS.
Employment Taxes - Depositing With The IRS
If your business has employees, you must pay employment taxes. The payment system can be a bit confusing, so this article discusses how to go about depositing employment taxes with the IRS.