Not directly related to taking a bad debt expense. But deducting expenses from a customer that did not pay.
I have a customer that does electrical. Does work in the residential building industry. He said that a air contractor told him he could not deduct the expenses (he called them bad debt) unless there is a lien taken on the house that was foreclosed upon from the builder. Anyone ever heard of this?
I told him I had never heard of that unless the company is on a accrual basis. That is the only time you can deduct a bad debt. Since my customer is cash basis I told him that his loss is what he paid out for labor and material doing the job. That he can't say "oh the job was $10,000 I am going to deduct that". He said he understood that but this other guy told him different.
Just making sure.
I have a customer that does electrical. Does work in the residential building industry. He said that a air contractor told him he could not deduct the expenses (he called them bad debt) unless there is a lien taken on the house that was foreclosed upon from the builder. Anyone ever heard of this?
I told him I had never heard of that unless the company is on a accrual basis. That is the only time you can deduct a bad debt. Since my customer is cash basis I told him that his loss is what he paid out for labor and material doing the job. That he can't say "oh the job was $10,000 I am going to deduct that". He said he understood that but this other guy told him different.
Just making sure.
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