12/09/2023
TAG SOMEBODY THAT OWES YOU MONEY‼️ 😭
The IRS states that if you lent someone money with the expectation of them paying you back, but they fail to repay you, you may be able to write off the unpaid amount.
DONT LIE AND GET CAUGHT UP, (not worth it 💯) make sure you can back up what your claiming to be true.
This is called a nonbusiness bad debt on your tax return.
What Form Do I Need to File❓
To claim a nonbusiness bad debt with the IRS, you will need to complete Form 8949 and attach it to your personal tax return.
In addition to Form 8949, you also must attach a written statement to your tax return that includes these three details:
The amount of money owed to you and the original due date for repayment
The name of the person who owes you money and their relationship to you
The efforts you made to try to recover the money owed and why you have basically given up on ever getting it back
Example Scenario
For example, let's say you loaned your mom $200 to buy some grocery items on November 1st, 2023. She said she would repay you on her next paycheck on November 15th.
When she failed to repay you over a week later, you called her on November 30th to ask about the unpaid loan. She dismissively told you to stop calling about that money she owes you - making it clear you’ll never get the $200 back.
In this case, you would report the $200 bad debt to the IRS by listing details of the scenario on Form 8949 and including that written statement as described above with your overall tax return.
Reporting Bad Debts to the IRS
While no one hopes to deal with a situation where personal loans go unpaid, you may have options through claiming nonbusiness bad debt with the IRS if you can demonstrate you realistically will not be paid back.
Just be sure to carefully document the loan terms and attempts to recover the amounts owed.
When you loan out money make sure it’s documented for tax purposes‼️
Source:
www.irs.gov/taxtopics/tc453?fbclid=IwAR3ic9d7XXVOeh3XpKnJ6ft_UhuNJ-5Sb50ecgbN7aeqQVlGkwY_9GJ640I_aem_AWAbvoorK93wkEmLp96snQWYJs_NnxB1TPMAJD7oQ1eUvxoA-upT4-S5S041ulweC74
