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Write offs -<br>
<br>
The strategy of how to handle the lost payment has been amply
covered by others. But, maybe I can shed a bit of light on whether
or not you can write off the missing check. The answer is yes and
no.<br>
<br>
If you booked the income you can write off the loss. Usually that
applies to people who account for their business using the accrual
method. These days that also usually implies an invoice generated by
your accounting system which must be balanced somehow. If you never
received payment, it would be a loss against the accrued income.<br>
<br>
If you are on a cash accounting method, as most of us are, you only
book income when you are paid. No payment, no income. But, you can't
deduct a lost payment because as far as your accounting is concerned
you never had it to lose.<br>
<br>
You can think of it this way. Perhaps you tune a piano as a favor.
Unless the receiver is a charity recognized by the IRS, you can't
deduct that either. Even then, you would want to document the gift.<br>
<br>
I hope this is helpful. I know I run the risk of confusing things
farther and that the thread was about action, not taxes. Still,
there is a lot of confusion about what is deductible in the world of
small proprietorships and I try to contribute where I can.<br>
<br>
Steve Brooks<br>
CFO, retired<br>
<br>
On 6/19/2011 1:00 PM, <a class="moz-txt-link-abbreviated" href="mailto:pianotech-request@ptg.org">pianotech-request@ptg.org</a> wrote:
<blockquote cite="mid:mailman.12.1308506405.20976.pianotech@ptg.org"
type="cite">
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<div class="headerdisplayname" style="display: inline;">Subject:
</div>
[pianotech] . Re: Customer dilemma</td>
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<div class="headerdisplayname" style="display: inline;">From:
</div>
"Larry Fisher RPT" <a class="moz-txt-link-rfc2396E" href="mailto:larryf@pacifier.com"><larryf@pacifier.com></a></td>
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<div class="headerdisplayname" style="display: inline;">Date:
</div>
Sat, 18 Jun 2011 19:37:43 -0700</td>
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<div class="headerdisplayname" style="display: inline;">To:
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<a class="moz-txt-link-rfc2396E" href="mailto:pianotech@ptg.org"><pianotech@ptg.org></a></td>
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<div>You can’t write off income that was never generated in
the first place. A lost check is income that was never
generated. You did the work but the money never made it
to the bank. No income, no taxes, no write off.</div>
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</blockquote>
<br>
<pre class="moz-signature" cols="72">--
I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
-- Winston Churchill
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