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When & How to Deduct Business Bad Debts

 
  Arthur F. Rothberg, Managing Director, CFO Edge, LLC  
   
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  Article Summary  
When diligence in performing credit checks and attempting to collect receivables do not achieve results, it is important to know when and how to deduct business bad debts.

Successfully reducing federal income taxes by deducting bad debts is grounded in several factors: IRS-defined types of bad debt, your accounting basis, and using one of two accounting treatments.

Used for tax purposes, direct write-offs of bad debts treat a previous-period non-collection as a deduction in a current period. Used for reporting and complying with generally accepted accounting principles (GAAP), allowance write-offs treat a non-collection as a deduction during the same period in which the debt was incurred.

Greater Los Angeles and Southern California executives wanting to know if and how they can deduct bad debts can benefit from talking with a provider of outsourced CFO services.

An on-demand CFO brings deep expertise in determining what non-collections are bad debts, using the correct accounting basis, and applying the right accounting treatment to maximize bad debt deductions.

  Open as PDF Open the entire article as a downloadable PDF (No form completion is requested.)  
     
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