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I own a PLLC- We provide services to children with autism.

I own a PLLC-...

I own a PLLC- We provide services to children with autism. We are primarily 3rd party funded through insurance companies. It was mentioned to me that we could deduct denied claims as a loss to the business. We paid providers for services that in turn were never reimbursed by the insurance company. I can't see where I would deduct these denials. Is there only 2 ways to report to the irs? Accural or Cash method? Is there any place where I would put that I paid providers for services that I did not get paid for?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

What about services that were rendered for no charge for low income families?These were services that were delivered on a case by case basis. I provided some of the services as well as did my other providers. Are any of the no charge service deductible?

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Answered in 7 minutes by:
3/24/2018
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,054
Experience: Adjunct Professor
Verified
Hey! I'm Carter, I'm a CPA and can help you out.
If you're on the accrual method of accounting and already reported the claim as income, then you can report the denied claim. If you're on cash basis, you never would have taken that claim into income, so you cannot deduct it.
If you paid providers for services and did not get reimbursed, you can deduct that. I would deduct that an an other expense.
If you render services for free or low charge, you are not allowed for a deduction for that.
Let me know if you need anything else. If not, please leave a rating. Thanks!
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Customer reply replied 1 month ago
I paid providers for services I was never reimbursed for so can deduct that as "other expense". I want to make sure I am not misunderstanding. I have already deducted all the wages ( using the cash method) from my income. Is this amount of "loss" able to be placed as an other expense as well?
you had an actual cash expense and you did not get compensated for it, so it is deductible.
If you've already deducted it elsewhere, you cannot claim it twice.
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Customer reply replied 1 month ago
One final question- as the sole proprietor I provided services that were denied by insurance companies. I am an PLLC not an Scorp. So i could deduct those losses under other expenses? And is the amount that I would dedcut the billed rate that was denied?
As a cash basis taxpayer, you cannot deduct the provided services. You would need to be an accrual based taxpayer where you already reported the income. It's not more beneficial, under both circumstances everything nets to $0 of income and expenses.
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,054
Experience: Adjunct Professor
Verified
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Carter McBride
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Category: Tax
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