Is your company waiting too long to claim a bad debt deduction?

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November 2016


In computing a book-tax difference for bad debts, many taxpayers simply flux the reserve balance without analyzing the underlying debts for worthlessness. Taxpayers should consider analyzing these debts more closely for federal and state tax purposes in order to claim a deduction for wholly worthless debts in the tax year they become wholly worthless and a deduction for partially worthless debts in the tax year they are properly charged off. By doing so, taxpayers may recognize the benefit of an accelerated bad debt deduction.

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Gregg Muresan

Private Company Services, Mid-Central Region Team Leader, PwC US

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