missaimee 12:38 PM 07-25-2009
Hi...I have a parent that owes me an amount of money that she can't afford to pay, and I can't afford to lose. Instead of going through the hassle of court and collections, can I just deduct the full amount from my tax liability? Is it possible to write this off as a loss? Thanks
Robert 12:56 PM 07-25-2009
Absolutely, make sure that you keep any contracts/agreements/communications from this client for three years. The reasoning is you offered your services for a period of time and was not paid for it. That is called a loss of your time/services, which you are in the business of charging for.
Chickenhauler 12:23 AM 07-26-2009
Originally Posted by Robert:
Absolutely, make sure that you keep any contracts/agreements/communications from this client for three years. The reasoning is you offered your services for a period of time and was not paid for it. That is called a loss of your time/services, which you are in the business of charging for.
Not sure on the deductability of it, but I know 3 years won't cut the mustard on record keeping. 7 is the law.
seashell 08:42 AM 07-28-2009
Originally Posted by Chickenhauler:
Not sure on the deductability of it, but I know 3 years won't cut the mustard on record keeping. 7 is the law.
I had this happen in my center. My accountant said we could not write it off as a loss but did hint that if they didn't have an end of the year statement with our Tax Id number, they couldn't claim it on their income tax return. We didn't cheat, we did claim the money, but we did deduct what they owed us from the yearly income total.
Robert 11:02 AM 07-28-2009
That makes no sense. I own several businesses that are Inc and LLC and if you take the time (which are your goods) to care for someone at the expense of not having room for someone else, then that is a loss. Most daycare have a limit/ratio as to how many they can care for. Someone not paying for services already rendered is a loss. seashell, Get a new accountant.
mac60 12:21 PM 07-28-2009
This is what I was told once when I asked about something similar.
Client was scheduled to be there for 2 more weeks. They bailed and I lost 2 weeks pay due to this. I was told I could not claim it as a loss as I had not preformed the services yet.
I would think that if the services had been rendered then yes, you should be able to write it off as a loss, but really don't know for sure.
judytrickett 07:11 AM 07-29-2009
I'm not sure about the write off on the taxes but I did want to say that I think you SHOULD go after the family. All you are doing is teaching them that they can get away with disrespecting other daycare providers.
There is no way in hell I would allow a family to just get away with it. Nope, not happening.
Also, in the future............always get paid on Monday at drop off for that weeks care. That way you are never working for free. No pay = no stay!
seashell 07:12 AM 07-29-2009
I checked with my accountant. You can not deduct the entire cost from your taxes, just what you spent on costs. (Diapers, food, etc). You can only deduct the full amount if you operate on a tax accural basis, not a cash accural basis, which is what most daycares are.
GretasLittleFriends 08:24 AM 07-29-2009
Originally Posted by missaimee:
Hi...I have a parent that owes me an amount of money that she can't afford to pay, and I can't afford to lose. Instead of going through the hassle of court and collections, can I just deduct the full amount from my tax liability? Is it possible to write this off as a loss? Thanks
Question for you... Can you set up a payment plan with this parent say $20/week (or something like that) towards her bill so that way in the end you get paid and she isn't overwhelmed all at once with the huge amount? Of course that'd change your taxes, cuz if the payment plan goes into the next year you will have to claim that income on your taxes even though the services were rendered the prior year.
Chickenhauler 02:06 PM 08-02-2009
Originally Posted by seashell:
I checked with my accountant. You can not deduct the entire cost from your taxes, just what you spent on costs. (Diapers, food, etc). You can only deduct the full amount if you operate on a tax accural basis, not a cash accural basis, which is what most daycares are.
That sounds about right.
It would be a double write off if you were able to deduct not only the food & supplies
and the lost income.
Unregistered 09:41 PM 08-05-2009
They are right, you cannot report the loss as a deduction. The deduction is already made in the sense that you will not pay taxes on the income you would have made. Deduct your average cost for supplies for that 1 child, but thats all you can get legitamitely.