A: If the business is on an accrual basis for their accounting, then the obligation not paid by the debtor was taken as income previously. In that case it should be listed under expenses as a bad debt. Client will have to have sufficient information to show that they made substantial efforts to collect the account and that it was written off as uncollected after those efforts were taken. Obviously, the ultimate situation would be if there was a bankruptcy, but this is not necessary as long as there is a file to show substantial efforts. 

If the client is on a cash basis, then the obligation due by the debtor was never picked up as income and, therefore, no adjustment is necessary on client's tax form and no deduction is available for that "bad debt." 

On a related note, client can send out a 1099 form to the IRS if they are writing the bad debt off, listing the debtors name, address, and ID number. Ultimately the IRS may then make sure the debtor lists the bad debt as income on their taxes. This does not do anything to collect the debt, but may give the client some satisfaction that the debtor is not completely getting away with non-payment. 

CHEERS: A member sought PICB's help to collect against a non-paying, long time customer who was now ignoring all their calls. The customer, when confronted by PICB, was treated ethically and with respect, but was provided no alternative but to cooperate. The customer explained how the recession impacted his previously profitable business. He truthfully shared his financial information and upon inspection it was clear his company was near closing. He admitted he simply didn't know how to deal with his 'fall from grace' and asked for help. With mutual respect PICB was able to negotiate a 'win-win' deal. The printer was paid in full over 12 months and maintained a good CASH paying customer. 

PS: The troubled company survived and thrived with PICB's & the printers help.

JEERS: A recent case, involving non-payment after services were rendered, has been won and collected in full after two years of battling between our client and the debtor! The printer's work was done well but the customer sunk to trickery and deception to avoid payment. Suit was filed using one of our affiliated attorneys. This printer has been a client of PICB for a long time, and had been warned previously that their lack of details left them exposed to loss.  As it happens sometimes, the owner is the proverbial "nice guy" who prefers handshakes to paperwork. Having failed to heed the warning he almost suffered a substantial loss. With PICB's assistance the lawyer assigned this case was able to construct a sufficient argument that won a judgment for the entire bill.

PS: We knew the customer's bank account Information and his bank was garnished resulting in 100% satisfaction for the  client.

NIGHTMARES: A Member sought help after his customer disappeared. The customer boasted he was a  founding partner in a well known company and that he had made millions upon its' sale. He looked the part wearing expensive suits, and driving nice cars. The customer claimed his new company was well funded. He explained to our client that he did not want a credit line, but a good price, and would pay cash if his price was met! The printer fell for the con and lost more than $500k by shipping the job without getting payment or checking the facts. By the time PICB was consulted it was too late. The address provided was a UPS store, the car was gone, the house was sold in foreclosure, and the client was only the LATEST victim. 

PS: the member never recovered from the loss and the recession and is now out of business.    

ROBBIE BURCH

DIRECTOR OF SALES AND SERVICE

[email protected]