Deducting Bad Debts - Cash Basis

You are.

You are, of course. However, one can never be certain what one is being told. Perhaps your friend is filing his taxes incorrectly, or perhaps he is referring to the fact that he is "writing off" these deadbeat invoices in his accounting program so they no longer show as owing, but filing his taxes correctly based on income received.

Thanks all. While I like being correct, it would have been nice to deduct them :-).

I don't think he's in the "write them off" verbiage category. I think he's really deducting them. We will have to have a talk.

(As I side note, I love it when someone say "but you don't have to pay for that, right? It's just a business write off" :-)

That ranks right up there with "Oh, you have your own business - that must be great! You can take as much vacation as you want whenever you want to!"

Well, it is a business write-off, in a sense. You just can't write it off twice, which is what he was really talking about doing.

Yeah... my subtle point is that they think a "write off" means "free" and that you save 100% of the expense, when it's really just a discount off purchase price at your tax rate.

My father ran his own business, and my mother did the books and taxes, though she was completely untrained to do either task.

She knew that supplies are written off and equipment was depreciated. So on the taxes she would depreciate equipment, and then also write it off.

Over more than 20 years the business was audited twice by the IRS, and neither time were those double deductions ever either an issue or even discovered.