Writing Off Bad Debt

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Writing off bad debt for an unpaid loan is sometimes a necessary task that should be completed in a business profit and loss statement. Discuss debt write-offs with an experienced accountant using tips from a financial adviser in this free video on money management.

Part of the Video Series: Investments & Money Management Tips
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Has somebody stiffed you on your loan? Hi this is Roger Groh at Groh Asset Management. Have you loaned money to somebody else and haven't gotten it back? Well then you have a bad loan and it may be to your advantage to recognize the bad loan from a tax point of view. How do you do it? Well if you are a company you would recognize it on your balance sheet and then expense that to your profit and loss statement. If you are an individual you may not be able to acknowledge or write that off other than potential lost income or maybe income due in future years. You'd really have to talk with your accountant on that. If it is a cross boarder issue, there may be one other consideration. It might be that the loan is good but the value of the currency has changed so much that the value of the loan has declined significantly. You may or may not want to recognize that depending upon what the law says in the country that you are based. If you are a bank you have to recognize it either way. If you are a person you don't and if you are going to get a quick swing back to where it initially was, you want to think very carefully about the tax consequences of recognizing both the down part of the cycle and the up part because if you are writing taxes going down you are going to pay them out the nose as they go up. Hope that helps. I'm Roger Groh at Groh Asset. Thank you very much for spending time with me.

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