Taxes Information
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Next Taxes Topic : Tax Trap #3 -- IRS Penalties, Interest and Love Letters - As a small business owner or self-employed person,
one of the easiest ways to keep Uncle Sam off your back
and out of your life is to file your forms, payments and
other paperwork on time.Over the next four months there are several key dates
that you dare not forget! Here they are -- all in one place,
along with links to the IRS website PDF ...[ read more]
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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.
Related Products For Download: Read Next : Tax Trap #3 -- IRS Penalties, Interest and Love LettersAs a small business owner or self-employed person, one of the easiest ways to keep Uncle Sam off your back and out of your life is to file your forms, payments and other paperwork on time.Over the next four months there are several key dates that you dare not forget! Here they are -- all in one place, along with links to the IRS website PDF ...
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