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Old 12-18-2013, 11:26 AM
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inzane inzane is offline
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cant write off bad debts?

My cpa says i can't write off bad debts because i am a "cash basis" tax payer because i don't pick up income until i collect it. I thought being able to write it off might make me "feel better" about the money i worked for that i won't get this year. I guess i'm just fed up with the whole thing. I'm supposed to get a call back today from a local collection agency. I'm just trying to figure out steps to have in place for next year so I can cut down on the amount of non-payments. I'm only expecting to hear I can't use collections for whatever BS reason. It sounds like to me that i go out and do the work, and nobody has to pay if they don't want to really. so is this really the way of it?
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Old 12-18-2013, 11:40 AM
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gulfjoe gulfjoe is offline
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I don't know how much money is owed to you, but it sounds like a fairly good amount. If I was in your situation I would get really creative with my debtors. First I would sit at their house and meet them in person and ask for payment, then I would follow them to their job and confront them in front of their peers, I would also go as far as making a sign and putting it their front lawn while they are at work letting their neighbors know they live next to scum. I understand everyone falls on hard times, but if you are having trouble paying the light bill you might want to tell the fert guy to stop coming.

Before I get blown up for this I would also exhaust all the legal ways too.
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Old 12-18-2013, 11:56 AM
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inzane inzane is offline
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Not much money owed, i'm not to upset about the amount its more about the principal.. We are talking $400 split up between 8 customers. all these debts are approaching 90 days (a few are over 90...) the highest balance is $110, lowest is $32. I couldn't show up at there house or work, i think i'd lose more money in potential clients if i was gonna be like that. I get most of my business from people who find me online.. A review from someone who I decided to "stalk" at work over a small amt. of money would lose me more money that i was gonna collect. lol. I just don't think thats the professional way to handle things. I'm gonna try a "final notice" letter that may be a little firm, then let it go after that. Its my fault, I just need to have something in place for next year to cut that number down. Out of around 80 customers, 8 non-payers doesn't seem real bad.

Anyone have any suggestions on a good letter for collections that is firm without being to rude??

Quote:
Originally Posted by gulfjoe View Post
I don't know how much money is owed to you, but it sounds like a fairly good amount. If I was in your situation I would get really creative with my debtors. First I would sit at their house and meet them in person and ask for payment, then I would follow them to their job and confront them in front of their peers, I would also go as far as making a sign and putting it their front lawn while they are at work letting their neighbors know they live next to scum. I understand everyone falls on hard times, but if you are having trouble paying the light bill you might want to tell the fert guy to stop coming.

Before I get blown up for this I would also exhaust all the legal ways too.
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Old 12-18-2013, 12:01 PM
jc1 jc1 is online now
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Your choices are
Keep trying to collect yourself.
Dept collections agency
Small claims court
Zero out the balance (in your accounting software)so that you can forget about it

Next season implement a better plan to stay on top of receivables.
In business their will be times that you don't get paid. The object is too reduce the chance or opportunity of it happening.
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Old 12-18-2013, 01:28 PM
32vld 32vld is offline
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Quote:
Originally Posted by inzane View Post
My cpa says i can't write off bad debts because i am a "cash basis" tax payer because i don't pick up income until i collect it. I thought being able to write it off might make me "feel better" about the money i worked for that i won't get this year. I guess i'm just fed up with the whole thing. I'm supposed to get a call back today from a local collection agency. I'm just trying to figure out steps to have in place for next year so I can cut down on the amount of non-payments. I'm only expecting to hear I can't use collections for whatever BS reason. It sounds like to me that i go out and do the work, and nobody has to pay if they don't want to really. so is this really the way of it?
Go talk to a lawyer and another CPA. You legal, reporting income, collecting sales tax, it should not matter if you are paid cash or check. A loss is a loss.

You have records that provide a paper trail as proof of who paid and who did not.
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Old 12-18-2013, 01:37 PM
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inzane inzane is offline
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i don't know what he means by "cash basis" i hardly ever see cash.. lol. This guy works with alot of landscaping companies all over the country to so i have trusted that he knows what he is talking about.. hmm.. it doesn't make sense either way.. especially hearing on LS about so many that just "write off" the non-payments. I'm gonna talk to another CPA.
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Old 12-18-2013, 01:46 PM
jc1 jc1 is online now
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Basically your gross income minus expenses is your net income. Therefore not being paid technically is not a loss in cash basis accounting. Any cost in doing the jobs ( payroll, fuel etc ) is an expense that already is accounted for.

Now if you were accrual based when you did the job you would consider it income as soon as it was invoiced. Regardless of weather you were paid for the job or not.
Say you invoice 10k a month. As far as you are concerned you made 10k (accrual )
You only receive payment for 9k (cash) the 9k is all you really made.

It's more complex then that but you get the idea?

Last edited by jc1; 12-18-2013 at 01:52 PM.
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Old 12-18-2013, 01:54 PM
jc1 jc1 is online now
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Quote:
Originally Posted by 32vld View Post
Go talk to a lawyer and another CPA. You legal, reporting income, collecting sales tax, it should not matter if you are paid cash or check. A loss is a loss.

You have records that provide a paper trail as proof of who paid and who did not.
On cash base you are not paying sale tax on what you bill only what you receive. Once received then you report and pay the sales tax.

Also on accrual say you billed 10k December 30. That would count as income for the tax year even though you may not be paid until February the following year. You would therefore be taxed on income not received this year.

This is a dumbed down example but gives an idea of the difference.
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Old 12-18-2013, 01:55 PM
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snomaha snomaha is offline
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Quote:
Originally Posted by inzane View Post
i don't know what he means by "cash basis" i hardly ever see cash.. lol. This guy works with alot of landscaping companies all over the country to so i have trusted that he knows what he is talking about.. hmm.. it doesn't make sense either way.. especially hearing on LS about so many that just "write off" the non-payments. I'm gonna talk to another CPA.
On a cash basis you don't report income until you receive payment - if you haven't reported the debt as income there is nothing to write off.

Don't know your local regulations but we have had success filing liens in the past. The liens had been primarily for sprinkler work - not sure if you can do the same with lawn care.
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Old 12-18-2013, 02:07 PM
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inzane inzane is offline
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thanks, it makes sense now. Filing leins and small claims court, etc.. makes little sense to me for small amounts. I'm gonna do the best i can to collect and drop the customer. Next year, pre-payment, auto-pay or check under doormat is the only way i'm gonna do it. I feel like that alone will weed out the folks living paycheck to paycheck trying to afford lawn care service. I have had more of a few of those types and don't want anymore of them.

Quote:
Originally Posted by snomaha View Post
On a cash basis you don't report income until you receive payment - if you haven't reported the debt as income there is nothing to write off.

Don't know your local regulations but we have had success filing liens in the past. The liens had been primarily for sprinkler work - not sure if you can do the same with lawn care.
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