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Richard, Attorney
Category: Legal
Satisfied Customers: 55452
Experience:  Attorney with 29 years of experience.
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I had a small bookkeeping business that was a S-Corp. I had

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I had a small bookkeeping business that was a S-Corp. I had a customer who owes me $32,000.00, and he went out of business. Since I was an S-Corp, I could not take this as a business loss. My question is can I take it as a personal loss. Do I have to sue this person to get the monies owed me? He will say he dosen't have any money. I have tried to wrok a payment plan with this person, but he doesn't stick to it. I guess I just want to know what my options are
Thank you

Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. Unfortunately, if the person will not pay voluntarily, you will have to file suit against him. But, that gives you more options than you have currently. Once the suit is filed and a
judgment awarded, you become a judgment creditor and can have the sheriff serve
a summons on the losing party for a debtor examination. That forces the losing
party to meet the judgment creditor in court and answer questions under oath
about the losing party's assets. After that
information is obtained, the judgment creditor has the power to garnish wages, attach bank
accounts, and/or have the sheriff seize other
property to satisfy the judgment.

From a tax standpoint, however, you would not be entitled to a deduction personally or as a business because you never recognized the income. Had you been an accrual basis taxpayer and reported this as income previously, then you could then later write it off when uncollectible. But, as a cash basis taxpayer, it's not income until you receive it and the only benefit that you get is the fact that you never had to report it as income.

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