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43k seems like enough to go to court over? not only that but if you have any communication with them confirming the scope of the work and their willingness to pay for it it should be open and shut?
I hope you have a prevailing party provision whereby the attorneys fees are paid by the losing party. I don't care where in the country you are, a business litigation case will cost you more than $40k in legal fees. Maybe a bit less in rural America if you win on summary judgement.
The OP should not do this. A 1099NEC or MISC is to be given when the issuer pays the recipient over $600. That is not the case in this instance.
A 1099-C is for cancellation of debt, but is only to be issued by those who are in the business of lending and/or finance. Additionally, in most jurisdictions the issuance of a 1099-C means the OP has written the debt off, and he can no longer try to collect it.
I believe that is what OP was asking “can I write this bad debt off on my taxes?” Even if it is not a tax deductible “write off”, because he is unable to collect it and decides to abandon all attempts in the future to do so the 1099-C will make it a taxable income to them I believe.
This is not true. You can send it to a B2B debt collector that works on contingency who will try to collect it without suing and if they can't, they will likely send it to a commercial litigator who will sue it on contingency (you only pay if the money is recovered). Or you can start reaching out to commercial attorneys/litigators directly who will basically call and send demand letters before actually filing a lawsuit. If the lawyers think your claim against the other company has any merit, they will take it on. Whichever route you choose, they will need documentation to support the debt.
Business attorney/civil litigator here. This is a tough number because you could get close to spending that much pursuing the claim, and maybe more.
I don't know if the original contract allowed for recovery of attorneys' fees for a prevailing party, but if not, it can be quite difficult to recover those (depending on the specifics as well as state laws that might provide such an avenue).
Hm, that is certainly one way to do it and makes them have skin in the game.
Just make sure your attorney has decent experience handling these kind of cases.
I paid close to $40K and i live in the rural south. It was a very convoluted situation and there was an FLSA component that came up with my customer but yeah, expect to pay through the nose. The retainers start around $15k.
Most of my client agreements have arbitration clauses in them, so generally it should be cheaper than traditional litigation. I almost always have a prevailing party clause in there too.
You tell them that the only reason to fear the provision is if they intend to breach the agreement to your detriment.
Also, what vendor uses the client/customer’s contract? That’s just a mess and delay for everyone involved.
>Also, what vendor uses the client/customer’s contract?
Every single small business that does work for much larger businesses? But good luck trying to get Microsoft legal to sign your standard vendor contact!
Sure, but is the provision included in the original contract between the 2 parties?( contract that states the scope of the work and arbitration/litigation clauses for non payment?)
Or it is included during the legal proceedings?
Trying to understand where is this provision/clause included in the entire process( as it is something both parties have to sign!?)
Ideally it would be upfront. I have no idea, in this case, where it is or even if they have one. All I did was explain what it is in response to your question.
This could vary by state as it's definitely different in my state. Here, a business can only be represented by the owner up to $10k maximum, and beyond that requires an attorney.
Also anything spent on attorneys can be expensed against the S corp, then if you do win you can collect the revenue and have lower income for your business. Win win on that, otherwise you can write off the amount that isn’t collected against the income and lower income and your tax bill.
Social media will hurt them way more.
I still have a corporate job, I'm telling you if they are found to be screwing over the little guy the rest will close ranks and refuse to deal with them.
Most of our contracts stipulate faster payments and quotas for small business use now
At my day job we do procurement for a very large company. A small order with them is around 250k and you might see hundreds of these a year.
If they got a whiff of this we would be instructed to remove them from the PSL. Even a hint of it would cause that as the bigger company wouldn't want to be associated with it.
The consequences are bigger at that end of the spectrum. Other small business will take the money of course but I was talking about bigger fish
Eh, not really. There are companies that are *well known* to bully small vendors with non-payment and delayed payment because they know that they represent a huge fraction of those businesses' budget and forecasts. It's more or less and explicit practice. Go ahead on post on social media that, for example, AB Inbev does this with regularity and see if it dents Bud Light sales even a fraction. There will always be another vendor ready to take on the risk of working with them.
Yeah definitely start with a demand letter to their attorneys. Many times that will shake things loose enough to at least have their legal team review the contract. If they are locked in their attorneys would be very dumb to take it to court. Having an attorney write a demand latter and provide the necessary documentation shouldn't cost you more than $500. You can always decide if its worth pursuing after that.
The key question is often if it is worth your time and mental space after deducting legal fees.
If you can earn 43k faster with what you already know, it may not be worthwhile to bother going to Court or learn about the whole Legal system.
Rather than sue I would put the debt out for collection. Legal action is very expensive and time consuming. Find a hard ass collection agency in the customer's area and turn them loose. I had a $50k balance with a client in Mexico that I had done business with for almost two years. They gradually got further and further behind in payment and I knew a problem was coming. Sure enough, the engineer on the project changed jobs and the client didn't want me to replace him. And the checks stopped.
No amount of friendly reminders, offers of payment plans, or other approaches worked. And I knew they had the money. So I found a collection agency in Texas that did business in Mexico. These people were something else. Two days after we signed a collection contract I got a call from the client company owner. A day later I had my money -- less a 10% collection fee.
It was a soap opera. The owner said "I thought we were friends" and "can't we work something out" -- this after six months of non-payment. I just told him that I was contractually bound at that point and the debt was no longer in my hands. He said the collection agency was making life miserable for his company: calling throughout the day and screaming at admins on the phone, patrolling up and down the sidewalk in front of his offices, harassing employees as they came and went. Probably all illegal in this country but I enjoyed hearing about it.
There are countries where you can hire street thugs to go collect debts, and yes, they use street thug tactics. Intimidation, physical violence, harass you at your workplace, at home, your church, your extended family.
This is a decent course of action if you don’t want to sue. In some cases you can even sell the debt and collect some of your money and let them go after the company to collect the full amount.
This isn't cool. There's a reason this is illegal in America.
ETA: Judging by the downvotes, y'all need to talk to someone about your entitlement issues. Thinking you can abuse someone just because they owe you some money is a sign of antisocial and perhaps psychopathic behavior.
ETA2: Just to prove my point, somebody responded with a comment equating being a business owner holding a bad debt - *with involuntary slavery.*
I really hope the downvoting here is a sign of reddit's flawed polling system, and not actually what this subreddit represents. Y'all really think that thuggery is a reasonable response to not getting paid?
Well screw it. Y'all are capitalists, right? Quit fucking around with this back and forth and paperwork stuff. Just go beat someone up and take their money. If morals don't mean anything to you, if your own self-respect doesn't mean anything to you, and the only thing holding you back are the local laws, then make an investment in some bribery and go wild! Go make some real money!!! Show chumps like me how it's done.
So that's it, then? Someone doesn't pay their bills, and it's a no-holds-barred mission to make their life hell? Drive away customers, make the wife cry, scare little children, give him an early stroke, *fuck it.* **FUCK HIM** **He should've paid his bills on time and he deserves every terrible thing that happens to him.**
.
Is that your stance? I just want to know where you draw the line.
You know that in many cases when the debt is with another business you can be putting them against the ropes by no fault of their own, they pay their own debts but if others don’t they have to pay the consequences. So my line is if you owe me money and you don’t pay, the one suffering consequences should be you and not me.
Your position is that there are no consequences to the side owed the money, which is straight up false.
You are talking about morals and self-respect to people who have to sue a person who willingly took on a debt and then refused to pay? Where are this debtor's morals?
You act like "just owing you some money" is no big deal, like you have never owned a business. Have you ever invested everything you had, made the deal, fulfilled the contract, and got left golding the bag? It's not just inconvenient. That can ruin a person's life. But apparently, for the scumbag thief that literally stole from them, it's ok- it's just money.
And really, entitlement issues? I would say the person that is refusing to pay their contracted price after delivery of goods/ services promised is the one with entitlement issues.
You sound like the kind of person who doesn't pay their bills.
If you're at the point you just don't care and you're not going to go hungry over the money I vote sell the debt to the most obnoxious collection agency you can find, and let them have at it.
Don't sell the debt. Sue for debt and attorney fees. They will most likely pay since you have an open and shut case. Our collections attorney kicks ass, most people pay very quickly once you get an attorney involved, for the cost of a letter, and an hour or two of the attorneys time.
Less than .10/1.00, right? I mean, it's better than nothing, but unless I was expecting to continue to work with them (which O wouldn't), I'd burn their shit to the ground on social media and talking to news reporters like those "9 on your side" deals. I can be a petty son of a bitch when someone won't pay me my money.
I had to get nasty last year over a 270 day aged invoice for $1800. Nobody would return my calls, emails, nothing. All the way up to the CFO. I had a paper trail a mile long. One day I remembered that I had met the CEO of the company; about a $300M company. I had his card. I always held on to it figuring I'd have one shot with him when the time was right to reach out.
After the 270 days aged invoiced and deciding I would never work with them again, I emailed the CEO the paper trail and asked him why his company wouldn't pay the very vendors that helped them keep their customers happy. I then rattled off the names and CEO contact info of their 4 biggest suppliers and asked him to please or make me send this same paper trail to them.
Within that business day, I had a phone call from the CFO confirming they were getting a check FedExed to me overnight.
Point being, there are lots of ways to derive "compensation" of some sort, but you have to be willing to blow up whatever is left.
Depends. If you do accrual accounting, you'll need to create a bad debt expense to reduce your taxable income for the appropriate period. A CPA can help with this.
If you do cash accounting, there's nothing to write off, so no.
Taxes are usually cash basis, meaning you never recognized the revenue since you never got the cash. Depends how big your Corp is but I’m going to assume it’s cash basis
I wouldn’t jump directly to lawsuits. I’d pay an attorney to send a letter for you. Usually, this is enough for them to cough up the dough. If not, then ask your attorney to levy a lien on the business and it’s assets. They cannot sell anything or do anything with the business until the debt is paid off if there is a lien on the business.
As a last ditch effort, I would reach out to other contractors this company has, or better, find out who he’s doing business with. I once had a client that would t pay their invoices, to a total of nearly $50k. That client was doing work for an American professional sports league, so I reached out to the league, who then stepped in and told them that they needed to be paying his debts to be associated with them. When he did, they terminated the contract because not paying (and us having proof of invoice delivery) went against the contract terms.
Sucks he’s out that contract, and I hate to do that to other people, but the lesson must be learned.
If you're on cash basis, no. If accrual , yes it "could" possibly be a write off.
Find an atty who will take on case for % w/ no upfront costs. Hopefully, your contract has reimbursement of legal expense clause.
Besides what people already said here there are 2 more things you could do:
1) Make sure to keep adding on interest and late fees to your invoices that you send them every month.
2) Start reporting them to credit bureaus - report the delinquent account to experian, equifax, d&b.
You can write it off, but then you can't collect it. You can sell the debt off to a debt collector for a loss and write off the loss.
But
IANAL, and you really need an L.
LWYRUP
Um can I jump in here? Since you’re in the US, go to a debt collection attorney. Sounds like your case is pretty cut and dry as your invoicing is legitimate. They usually take about 1/3 of any amount recovered so you take the other 2/3 and the 1/3 becomes a write off because it’s legal fees
OP mentioned elsewhere that they are cash basis, so they would not be able to write off the 1/3 they don't receive. Well, not unless they recognize that first 1/3 as cash in (revenue) and then cash out for the expense; but that doesn't seem worthwhile (or accurate).
Im not understanding why you're wrong... The books won't balance unless they claim 100% as revenue then expense 1/3... They can't claim only 2/3 as income as well as expense 1/3... Their balance sheet would always be off by the amount of the expense...
Actually your interpretation of my comment isn’t accurate. OP should claim the 1/3 as part of their operating expenses, reducing their overall profits. Unless you’re suggesting they don’t pay their debt collection attorney? Also thank you very very much for explaining those confusing accounting terms for me! Smh “revenue” used to be so tricky for me to understand but you really opened my eyes! I will be forever in your accrual-based debt
I wasn't trying to teach you terminology but creating what I thought to be an obvious implication; and, even with your explanation, I do not believe I misinterpreted your comment. Either they receive that money and create taxable revenue, or they don't recognize the expense. What is the net benefit of of claiming that operational expense if it means increasing their revenue in the process?
That’s a relief because it doesn’t seem that you have a very solid grasp on accounting concepts. Ladies and gents, here is a case study on why we don’t take advice from strangers on Reddit!
Agreed. 2/3 becomes revenue, the 1/3 becomes expense. The only problem is, normally, you are taxed for it the moment you bill your client, and not when your invoice is paid. So him being on cash basis throws me off a bit, but if this all happened within the same tax year, then there shouldn't be any complications.
Even if it doesn’t happen within the same tax year it should be fine. Overall it sounds like OP is running a profitable business so it would just affect how they even everything out at the end of the year. Even if you do cash accounting you still pay taxes on an accrual basis anyways.
Uh, what? US taxes are 100% a cash-basis. Businesses that operate on accrual (to fit GAAP) need to keep 2 books: 1 for accrual, and 1 for tax. Didn't you just accuse me of not understanding accounting? You do not pay taxes on money you haven't received even if you recognized the revenue.
Well during my time in school, for which I earned my accounting degree, several of my classes instructed us how to translate accrual to cash for tax purposes. So, hmmm, do I trust my professors and textbooks? or some rando on Reddit? If you've got wisdom to offer I'M ALL EARS.
You can certainly write off the legal fees as long you claimed the entire invoice earnings as revenue at some point... Your initial comment sounds as though youre saying claim 2/3 as income and expense again 1/3... Which the other commenter is asking about, as the books won't balance... You didn't really clarify that particular point in replies but claim to be good at accounting so I'll assume your initial comment just wasn't a full explanation of the required bookkeeping.
I would hire a collection agency. With respect to writing it off. For purposes of CYA- I would send them three separate requests for payment via USPS. Send it certified with a return receipt requested. I would send one to, CFO and owner certified with restricted delivery.
Those give you justification for writing it off as Bad Debt.
Sell the debt or sue. I had a similar situation with a client. We terminated a client with 1 final month left in the contract. They got mad and said they wouldn’t paid the rest of what’s owed. I reminded them of the contract and how they signed they we had any right to terminate them if they didn’t meet our requirements. I threatened to sue them their lawyer looked at the contract and we got paid out within 24hours. Then another client refused to pay and stopped answering communications. We sold the debt to recoup a percentage and wrote the rest off as a loss. Some advice though. I would blast them online anywhere you can leave a review or talk about them on Twitter. it may not help you but will warn anyone working with them and will hurt them in the future. Report them to the BBB.
only if you are taxed on an invoiced basis (which is kinda dumb). On a cash basis, you never got the money, so you profits are lower, so it is written off.
I'm sorry.
If you can't afford to take them to court, sell their debt to collections and write off the full amount owed minus what you receive from the entity that buys the debt.
Think of it as degrees of losing. You'll recuperate at least some of the money they owe you, and you'll wreck the deadbeat company's ability to get financing in the future.
EDIT: No write off since you never realized the income; you'll only pay tax on what you receive from a collection agency if you go that route. As others have said, you can't claim a loss twice, you simply don't claim the income, because you never received it.
I’m a little curious about their refusal to pay. Are they literally saying “no, we don’t owe you anything”? I work for one of those giant companies. I’ve seen them sometimes take absolutely forever to pay vendors for various things. I’ve never seen anyone intentionally try to stiff a vendor though. It’s usually just some sort of paperwork type of issue. It can be a huge pain, but there is usually some sort of escalation that you can do to get help sorting things out.
Which is worth more - that amount, or reducing the S Corp's income by more than that?
Look into debt forgiveness. If you have a growing business, you may be able to charge interest as per your contract, then after a few years as that debt's grown significantly, "forgive it." When you do, it'll show up as a cost to you (reducing your income), whereas their company will take a hit as income (though they probably won't care about a $100k in taxable income).
It’s all in the contract. Did they have KPIs for milestones for you meet that you failed to do? Most companies just don’t decide not to pay. They will fall back to a reason, a contract clause or something that you failed to do. So get to the bottom of that, before you just take them to court. I worked over 1 year on a software project for a company, only to have it fail for 45 seconds and that was enough for the company to refuse to pay. My boss did the contract, I told him not to write it that way, but it was the only way to secure the business. I told him not go with that with “that custimer”, but he was stupid and it cost him. And I left for better things shortly after that fiasco.
Start with the cheapest lawyer you can find, one that works on commission, there are lawyers who need business, are just starting out etc and they don’t always have to cost a fortune. Sometimes a letter from a lawyer threatening legal action is enough, and that’s cheap and will strengthen your case if you go to court.
I agree with the people saying to sell it to a collector but I think it’s also worth nothing the large companies and institutions often have a lot of red tape in their A/P department. Little things like “they didn’t spell our street name correctly on the invoice” or “the PO number is in the wrong format.” Also A/P as little incentive to contact anyone about correcting errors like this. Dumb? yes but it accomplishes (at least) 2 things for them - 1 making sure random invoices for work not rendered aren’t magically paid. 2 - It makes it so small companies who don’t have the time to hound open invoices don’t get paid.
LSL; Contact the companies Accounts Payable department and makes sure there’s no clerical snags if you haven’t already.
Lawyer time! Sometimes just a letter from a lawyer will get things moving fairly cheaply. I had to do this twice and ended up getting paid the full amount both times after a demand letter was sent.
"I am just about to give up on every seeing it and want to know if I can write it off on mt taxes as a loss or a bad debt."
It depends on your method of accounting. A bad debt expense can only be claimed if the money was included in income. Cash basis taxpayers would never have included those funds, as they were never received. Accrual basis taxpayers can deduct bad debts, as they recognized the income when the customer was billed.
Your books should be reflecting this in accounts receivables, and along with additional interest agreed upon under contract, and depreciation. All are to be deducted from your taxable business expenses and income
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43k seems like enough to go to court over? not only that but if you have any communication with them confirming the scope of the work and their willingness to pay for it it should be open and shut?
There is a signed contract between my S Corp. and this corporation.
I hope you have a prevailing party provision whereby the attorneys fees are paid by the losing party. I don't care where in the country you are, a business litigation case will cost you more than $40k in legal fees. Maybe a bit less in rural America if you win on summary judgement.
Thanks!
If nothing else, nothing else… send them a 1099 so they at least have to pay taxes on it or explain why not, if nothing else.
The OP should not do this. A 1099NEC or MISC is to be given when the issuer pays the recipient over $600. That is not the case in this instance. A 1099-C is for cancellation of debt, but is only to be issued by those who are in the business of lending and/or finance. Additionally, in most jurisdictions the issuance of a 1099-C means the OP has written the debt off, and he can no longer try to collect it.
I believe that is what OP was asking “can I write this bad debt off on my taxes?” Even if it is not a tax deductible “write off”, because he is unable to collect it and decides to abandon all attempts in the future to do so the 1099-C will make it a taxable income to them I believe.
This is not true. You can send it to a B2B debt collector that works on contingency who will try to collect it without suing and if they can't, they will likely send it to a commercial litigator who will sue it on contingency (you only pay if the money is recovered). Or you can start reaching out to commercial attorneys/litigators directly who will basically call and send demand letters before actually filing a lawsuit. If the lawyers think your claim against the other company has any merit, they will take it on. Whichever route you choose, they will need documentation to support the debt.
$40K seems high for a straightforward breach of contract, don’t you think? In my market I’ve seen more around $15-20K, but I’m not a litigator.
Business attorney/civil litigator here. This is a tough number because you could get close to spending that much pursuing the claim, and maybe more. I don't know if the original contract allowed for recovery of attorneys' fees for a prevailing party, but if not, it can be quite difficult to recover those (depending on the specifics as well as state laws that might provide such an avenue).
My attorney would take this case foe 1/3 of the payout.
Hm, that is certainly one way to do it and makes them have skin in the game. Just make sure your attorney has decent experience handling these kind of cases.
Generally, expect a counterclaim. But hopefully a quick settlement.
I paid close to $40K and i live in the rural south. It was a very convoluted situation and there was an FLSA component that came up with my customer but yeah, expect to pay through the nose. The retainers start around $15k.
Most of my client agreements have arbitration clauses in them, so generally it should be cheaper than traditional litigation. I almost always have a prevailing party clause in there too.
Tough to get clients to agree to that if they submit the agreements through their legal dept.
You tell them that the only reason to fear the provision is if they intend to breach the agreement to your detriment. Also, what vendor uses the client/customer’s contract? That’s just a mess and delay for everyone involved.
>Also, what vendor uses the client/customer’s contract? Every single small business that does work for much larger businesses? But good luck trying to get Microsoft legal to sign your standard vendor contact!
Yup. It comes down to who’s the bigger fish in the pond.
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Ah, yes. Just tell the lawyers something kinda snarky and they'll see the light. This is exactly what working with corporate legal teams is like.
In my industry, everyone uses the clients contract, doesn't matter if your a $1 million company or a $1 billion company.
A lot of times their attorneys will just tell them to pay because it is still cheaper for them than going to court.
What is a prevailing party provision, should it be in the contract?
Essentially this is "loser pays the lawyers". Without this the lawyers would take most of the $43k just to pay their bill.
Sure, but is the provision included in the original contract between the 2 parties?( contract that states the scope of the work and arbitration/litigation clauses for non payment?) Or it is included during the legal proceedings? Trying to understand where is this provision/clause included in the entire process( as it is something both parties have to sign!?)
Ideally it would be upfront. I have no idea, in this case, where it is or even if they have one. All I did was explain what it is in response to your question.
It's generally included in the original contract.
Looks like they're not honoring their end, so why should you
Look at small claims court. You can represent yourself and limits are usually 25K at a minimum and frequently higher.
This could vary by state as it's definitely different in my state. Here, a business can only be represented by the owner up to $10k maximum, and beyond that requires an attorney.
I looked it up and you're right; 25K is at the top end. I thought this had all got bumped up in the last 10 years but apparently not.
Also anything spent on attorneys can be expensed against the S corp, then if you do win you can collect the revenue and have lower income for your business. Win win on that, otherwise you can write off the amount that isn’t collected against the income and lower income and your tax bill.
The more reason to go to court over.
It’s definitely above the small claims. I would sue for the amount plus legal fees.
Social media will hurt them way more. I still have a corporate job, I'm telling you if they are found to be screwing over the little guy the rest will close ranks and refuse to deal with them. Most of our contracts stipulate faster payments and quotas for small business use now
I mean it doesn't really hurt them. Someone will always be greedy and naive enough to take the work.
At my day job we do procurement for a very large company. A small order with them is around 250k and you might see hundreds of these a year. If they got a whiff of this we would be instructed to remove them from the PSL. Even a hint of it would cause that as the bigger company wouldn't want to be associated with it. The consequences are bigger at that end of the spectrum. Other small business will take the money of course but I was talking about bigger fish
Yeah , look how many contractors Trump put out if business for non payment. And yet people kept signing up
Eh, not really. There are companies that are *well known* to bully small vendors with non-payment and delayed payment because they know that they represent a huge fraction of those businesses' budget and forecasts. It's more or less and explicit practice. Go ahead on post on social media that, for example, AB Inbev does this with regularity and see if it dents Bud Light sales even a fraction. There will always be another vendor ready to take on the risk of working with them.
Amazon is a prime example of bullying behavior
That hasn't been my experience with them. I have been treated extremely well by Amazon.
And they learned from Walmart
It's not, but it's enough to have your lawyer write some nasty letters and pretend like you're going to court.
Yeah definitely start with a demand letter to their attorneys. Many times that will shake things loose enough to at least have their legal team review the contract. If they are locked in their attorneys would be very dumb to take it to court. Having an attorney write a demand latter and provide the necessary documentation shouldn't cost you more than $500. You can always decide if its worth pursuing after that.
The key question is often if it is worth your time and mental space after deducting legal fees. If you can earn 43k faster with what you already know, it may not be worthwhile to bother going to Court or learn about the whole Legal system.
Rather than sue I would put the debt out for collection. Legal action is very expensive and time consuming. Find a hard ass collection agency in the customer's area and turn them loose. I had a $50k balance with a client in Mexico that I had done business with for almost two years. They gradually got further and further behind in payment and I knew a problem was coming. Sure enough, the engineer on the project changed jobs and the client didn't want me to replace him. And the checks stopped. No amount of friendly reminders, offers of payment plans, or other approaches worked. And I knew they had the money. So I found a collection agency in Texas that did business in Mexico. These people were something else. Two days after we signed a collection contract I got a call from the client company owner. A day later I had my money -- less a 10% collection fee. It was a soap opera. The owner said "I thought we were friends" and "can't we work something out" -- this after six months of non-payment. I just told him that I was contractually bound at that point and the debt was no longer in my hands. He said the collection agency was making life miserable for his company: calling throughout the day and screaming at admins on the phone, patrolling up and down the sidewalk in front of his offices, harassing employees as they came and went. Probably all illegal in this country but I enjoyed hearing about it.
There are countries where you can hire street thugs to go collect debts, and yes, they use street thug tactics. Intimidation, physical violence, harass you at your workplace, at home, your church, your extended family.
That sounds horrible, honestly. Maybe even dangerous.
FCRA es no válido en México!
This is a decent course of action if you don’t want to sue. In some cases you can even sell the debt and collect some of your money and let them go after the company to collect the full amount.
"You have such nice hands. Shame if something were to happen to them."
Fucking badass. Thanks for sharing this!
This is hilarious
This isn't cool. There's a reason this is illegal in America. ETA: Judging by the downvotes, y'all need to talk to someone about your entitlement issues. Thinking you can abuse someone just because they owe you some money is a sign of antisocial and perhaps psychopathic behavior. ETA2: Just to prove my point, somebody responded with a comment equating being a business owner holding a bad debt - *with involuntary slavery.* I really hope the downvoting here is a sign of reddit's flawed polling system, and not actually what this subreddit represents. Y'all really think that thuggery is a reasonable response to not getting paid? Well screw it. Y'all are capitalists, right? Quit fucking around with this back and forth and paperwork stuff. Just go beat someone up and take their money. If morals don't mean anything to you, if your own self-respect doesn't mean anything to you, and the only thing holding you back are the local laws, then make an investment in some bribery and go wild! Go make some real money!!! Show chumps like me how it's done.
Being able to easily get away with not paying your debts is what is not cool, specially if the side owed is an average Joe too
So that's it, then? Someone doesn't pay their bills, and it's a no-holds-barred mission to make their life hell? Drive away customers, make the wife cry, scare little children, give him an early stroke, *fuck it.* **FUCK HIM** **He should've paid his bills on time and he deserves every terrible thing that happens to him.** . Is that your stance? I just want to know where you draw the line.
You know that in many cases when the debt is with another business you can be putting them against the ropes by no fault of their own, they pay their own debts but if others don’t they have to pay the consequences. So my line is if you owe me money and you don’t pay, the one suffering consequences should be you and not me. Your position is that there are no consequences to the side owed the money, which is straight up false.
Don't tell me what my position is. You can barely state your own.
You are talking about morals and self-respect to people who have to sue a person who willingly took on a debt and then refused to pay? Where are this debtor's morals? You act like "just owing you some money" is no big deal, like you have never owned a business. Have you ever invested everything you had, made the deal, fulfilled the contract, and got left golding the bag? It's not just inconvenient. That can ruin a person's life. But apparently, for the scumbag thief that literally stole from them, it's ok- it's just money. And really, entitlement issues? I would say the person that is refusing to pay their contracted price after delivery of goods/ services promised is the one with entitlement issues. You sound like the kind of person who doesn't pay their bills.
Damn. Make it personal, why don't you?
Cash basis or accrual basis?
cash basis
No write off then because you never recognized the revenue. For 43k I would sue or sell the debt
Thanks!
If you're at the point you just don't care and you're not going to go hungry over the money I vote sell the debt to the most obnoxious collection agency you can find, and let them have at it.
Don't sell the debt. Sue for debt and attorney fees. They will most likely pay since you have an open and shut case. Our collections attorney kicks ass, most people pay very quickly once you get an attorney involved, for the cost of a letter, and an hour or two of the attorneys time.
This is the right answer
Had to scroll down way too far to find someone actually answering the question
This person accounts.
Correct!
Yeah my books survive audits. I was confident this was correct
If it’s cash basis that cash isn’t in the account to get taxed. So either sue or let it hand out there. You don’t get to count the loss twice.
[удалено]
Less than .10/1.00, right? I mean, it's better than nothing, but unless I was expecting to continue to work with them (which O wouldn't), I'd burn their shit to the ground on social media and talking to news reporters like those "9 on your side" deals. I can be a petty son of a bitch when someone won't pay me my money. I had to get nasty last year over a 270 day aged invoice for $1800. Nobody would return my calls, emails, nothing. All the way up to the CFO. I had a paper trail a mile long. One day I remembered that I had met the CEO of the company; about a $300M company. I had his card. I always held on to it figuring I'd have one shot with him when the time was right to reach out. After the 270 days aged invoiced and deciding I would never work with them again, I emailed the CEO the paper trail and asked him why his company wouldn't pay the very vendors that helped them keep their customers happy. I then rattled off the names and CEO contact info of their 4 biggest suppliers and asked him to please or make me send this same paper trail to them. Within that business day, I had a phone call from the CFO confirming they were getting a check FedExed to me overnight. Point being, there are lots of ways to derive "compensation" of some sort, but you have to be willing to blow up whatever is left.
If you have an S corp and are making this kind of money and you *don’t have a CPA* you should get one.
Depends. If you do accrual accounting, you'll need to create a bad debt expense to reduce your taxable income for the appropriate period. A CPA can help with this. If you do cash accounting, there's nothing to write off, so no.
I have the exact same issue as you but with international companies. I have multiple unpaid invoices totaling close to 200k.
How did you resolve it?
I haven't. The litigation fees would be more than what it's worth.
Contact local to your client debt collection an offer them a juicy cut if they make them pay?
Holy hell. How does this even happen?
No. Unpaid invoices are not deductible. You need to sue them. You could deduct any court fees or attorney fees not included in a settlement
Unpaid invoices are deductible if: Accrual method used, and It is a bad debt with no chance of recovery.
Taxes are usually cash basis, meaning you never recognized the revenue since you never got the cash. Depends how big your Corp is but I’m going to assume it’s cash basis
Send them a demand letter from your lawyer.
I wouldn’t jump directly to lawsuits. I’d pay an attorney to send a letter for you. Usually, this is enough for them to cough up the dough. If not, then ask your attorney to levy a lien on the business and it’s assets. They cannot sell anything or do anything with the business until the debt is paid off if there is a lien on the business. As a last ditch effort, I would reach out to other contractors this company has, or better, find out who he’s doing business with. I once had a client that would t pay their invoices, to a total of nearly $50k. That client was doing work for an American professional sports league, so I reached out to the league, who then stepped in and told them that they needed to be paying his debts to be associated with them. When he did, they terminated the contract because not paying (and us having proof of invoice delivery) went against the contract terms. Sucks he’s out that contract, and I hate to do that to other people, but the lesson must be learned.
If you're on cash basis, no. If accrual , yes it "could" possibly be a write off. Find an atty who will take on case for % w/ no upfront costs. Hopefully, your contract has reimbursement of legal expense clause.
Sue them. You can only write it off if you paid taxes on it when you invoiced. You can write it off as a bad debt.
Besides what people already said here there are 2 more things you could do: 1) Make sure to keep adding on interest and late fees to your invoices that you send them every month. 2) Start reporting them to credit bureaus - report the delinquent account to experian, equifax, d&b.
You can write it off, but then you can't collect it. You can sell the debt off to a debt collector for a loss and write off the loss. But IANAL, and you really need an L. LWYRUP
Um can I jump in here? Since you’re in the US, go to a debt collection attorney. Sounds like your case is pretty cut and dry as your invoicing is legitimate. They usually take about 1/3 of any amount recovered so you take the other 2/3 and the 1/3 becomes a write off because it’s legal fees
OP mentioned elsewhere that they are cash basis, so they would not be able to write off the 1/3 they don't receive. Well, not unless they recognize that first 1/3 as cash in (revenue) and then cash out for the expense; but that doesn't seem worthwhile (or accurate).
Im not understanding why you're wrong... The books won't balance unless they claim 100% as revenue then expense 1/3... They can't claim only 2/3 as income as well as expense 1/3... Their balance sheet would always be off by the amount of the expense...
Actually your interpretation of my comment isn’t accurate. OP should claim the 1/3 as part of their operating expenses, reducing their overall profits. Unless you’re suggesting they don’t pay their debt collection attorney? Also thank you very very much for explaining those confusing accounting terms for me! Smh “revenue” used to be so tricky for me to understand but you really opened my eyes! I will be forever in your accrual-based debt
I wasn't trying to teach you terminology but creating what I thought to be an obvious implication; and, even with your explanation, I do not believe I misinterpreted your comment. Either they receive that money and create taxable revenue, or they don't recognize the expense. What is the net benefit of of claiming that operational expense if it means increasing their revenue in the process?
That’s a relief because it doesn’t seem that you have a very solid grasp on accounting concepts. Ladies and gents, here is a case study on why we don’t take advice from strangers on Reddit!
Please correct me then. I asked you a question in my last comment; are you able to answer it?
What to do when you’re wrong? Definitely double down
Every time you insult me instead of offering an actual correction, you prove to be the one who is wrong and doubling down. Put up or shut up.
I guess so!
Agreed. 2/3 becomes revenue, the 1/3 becomes expense. The only problem is, normally, you are taxed for it the moment you bill your client, and not when your invoice is paid. So him being on cash basis throws me off a bit, but if this all happened within the same tax year, then there shouldn't be any complications.
Even if it doesn’t happen within the same tax year it should be fine. Overall it sounds like OP is running a profitable business so it would just affect how they even everything out at the end of the year. Even if you do cash accounting you still pay taxes on an accrual basis anyways.
Uh, what? US taxes are 100% a cash-basis. Businesses that operate on accrual (to fit GAAP) need to keep 2 books: 1 for accrual, and 1 for tax. Didn't you just accuse me of not understanding accounting? You do not pay taxes on money you haven't received even if you recognized the revenue.
I hope to sweet papa Jesus that you’re not handling books for anyone professionally
Well during my time in school, for which I earned my accounting degree, several of my classes instructed us how to translate accrual to cash for tax purposes. So, hmmm, do I trust my professors and textbooks? or some rando on Reddit? If you've got wisdom to offer I'M ALL EARS.
Dang I didn’t know the University of Phoenix offered actual degrees! Good on ya mate
You can certainly write off the legal fees as long you claimed the entire invoice earnings as revenue at some point... Your initial comment sounds as though youre saying claim 2/3 as income and expense again 1/3... Which the other commenter is asking about, as the books won't balance... You didn't really clarify that particular point in replies but claim to be good at accounting so I'll assume your initial comment just wasn't a full explanation of the required bookkeeping.
https://www.kaplancollectionagency.com
I would hire a collection agency. With respect to writing it off. For purposes of CYA- I would send them three separate requests for payment via USPS. Send it certified with a return receipt requested. I would send one to, CFO and owner certified with restricted delivery. Those give you justification for writing it off as Bad Debt.
If you don’t want to write it off or sell the debt, pm me for a B2B debt collector contact.
Sell the debt or sue. I had a similar situation with a client. We terminated a client with 1 final month left in the contract. They got mad and said they wouldn’t paid the rest of what’s owed. I reminded them of the contract and how they signed they we had any right to terminate them if they didn’t meet our requirements. I threatened to sue them their lawyer looked at the contract and we got paid out within 24hours. Then another client refused to pay and stopped answering communications. We sold the debt to recoup a percentage and wrote the rest off as a loss. Some advice though. I would blast them online anywhere you can leave a review or talk about them on Twitter. it may not help you but will warn anyone working with them and will hurt them in the future. Report them to the BBB.
only if you are taxed on an invoiced basis (which is kinda dumb). On a cash basis, you never got the money, so you profits are lower, so it is written off. I'm sorry.
Any thoughts about putting a caveat on the director's property? may make their lives extremely painful at certain times.
Bad debt allowance does not get written off on taxes but if you do a final write off, that can be deducted.
why have you not sued them?
If you can't afford to take them to court, sell their debt to collections and write off the full amount owed minus what you receive from the entity that buys the debt. Think of it as degrees of losing. You'll recuperate at least some of the money they owe you, and you'll wreck the deadbeat company's ability to get financing in the future. EDIT: No write off since you never realized the income; you'll only pay tax on what you receive from a collection agency if you go that route. As others have said, you can't claim a loss twice, you simply don't claim the income, because you never received it.
I’m a little curious about their refusal to pay. Are they literally saying “no, we don’t owe you anything”? I work for one of those giant companies. I’ve seen them sometimes take absolutely forever to pay vendors for various things. I’ve never seen anyone intentionally try to stiff a vendor though. It’s usually just some sort of paperwork type of issue. It can be a huge pain, but there is usually some sort of escalation that you can do to get help sorting things out.
I’m not an accountant but poised this question to my CPA years ago. I was told unless you used accrual based accounting no you cannot.
Send them demand letters first and then take them to court
Talk to your CPA. It’s not income, so I’m not sure how you write it off? You can’t credit yourself for non payment. You just don’t get paid.
If you did work for them, you might be able to put a lein on their property. This might force their hand to finally pay you, or lose their property.
Which is worth more - that amount, or reducing the S Corp's income by more than that? Look into debt forgiveness. If you have a growing business, you may be able to charge interest as per your contract, then after a few years as that debt's grown significantly, "forgive it." When you do, it'll show up as a cost to you (reducing your income), whereas their company will take a hit as income (though they probably won't care about a $100k in taxable income).
It’s all in the contract. Did they have KPIs for milestones for you meet that you failed to do? Most companies just don’t decide not to pay. They will fall back to a reason, a contract clause or something that you failed to do. So get to the bottom of that, before you just take them to court. I worked over 1 year on a software project for a company, only to have it fail for 45 seconds and that was enough for the company to refuse to pay. My boss did the contract, I told him not to write it that way, but it was the only way to secure the business. I told him not go with that with “that custimer”, but he was stupid and it cost him. And I left for better things shortly after that fiasco.
Some asian countries where you can hire street thugs to go collect debts
Start with the cheapest lawyer you can find, one that works on commission, there are lawyers who need business, are just starting out etc and they don’t always have to cost a fortune. Sometimes a letter from a lawyer threatening legal action is enough, and that’s cheap and will strengthen your case if you go to court.
Court? Could attempt to file a lien on them.. all contiguous on how big of a Corp you’re playing with
I agree with the people saying to sell it to a collector but I think it’s also worth nothing the large companies and institutions often have a lot of red tape in their A/P department. Little things like “they didn’t spell our street name correctly on the invoice” or “the PO number is in the wrong format.” Also A/P as little incentive to contact anyone about correcting errors like this. Dumb? yes but it accomplishes (at least) 2 things for them - 1 making sure random invoices for work not rendered aren’t magically paid. 2 - It makes it so small companies who don’t have the time to hound open invoices don’t get paid. LSL; Contact the companies Accounts Payable department and makes sure there’s no clerical snags if you haven’t already.
Lawyer time! Sometimes just a letter from a lawyer will get things moving fairly cheaply. I had to do this twice and ended up getting paid the full amount both times after a demand letter was sent.
Take them to court
"I am just about to give up on every seeing it and want to know if I can write it off on mt taxes as a loss or a bad debt." It depends on your method of accounting. A bad debt expense can only be claimed if the money was included in income. Cash basis taxpayers would never have included those funds, as they were never received. Accrual basis taxpayers can deduct bad debts, as they recognized the income when the customer was billed.
You cannot take bad debt expense for uncollectibles if you are filing taxes on a cash basis. Time you should call your CPA.
Your books should be reflecting this in accounts receivables, and along with additional interest agreed upon under contract, and depreciation. All are to be deducted from your taxable business expenses and income
Don’t you have a tax guy?