Starting Your Business

What are Business Expenses

Business Bad Debts

If someone owes you money you cannot collect, you have a bad debt. You may be able to deduct the uncollectible amount when you figure your tax.

A business bad debt is a loss from the worthlessness of a debt that was either:

1. Created or acquired in your trade or business, or
2. Closely related to your trade or business when it became partly or totally worthless.

For more information on how to treat and where to deduct bad debts, see Publication 535.

Important References:

Publication 535	Business Expenses
Schedule C (Form 1040)	Profit or Loss From Business
Schedule C-EZ (Form 1040)	Net Profit From Business
Schedule F (Form 1040)	Profit or Loss From Farming
Form 1120	U.S. Corporation Income Tax Return
Form 1065	U.S. Partnership Return of Income