Bad Debt for Accrual Based Client

[Leetpurple]

Hi!  You've been so helpful in the past, I have another question.  I have an accrual based S corp client who never tracked Accounts Receivable.  He now has Bad Debts, and I am trying to figure out a way to use these Bad Debts as an expense.  I actually don't think I can as we haven't been tracking Accounts Receivable, but perhaps someone has a suggestion?

Thanks in advance.

[dascpa · Accepted solution]

How can you deduct a bad debt expense when you never reported the revenue?  Never tracked A/R?  Sounds like client has bigger problems to worry about.

[qbteachmt]

If you always reported the income, then a write off of unpaid sales is lost revenue. You also need to deal with any sales tax issues per your agency requirements.

You should read this, for Credit Sales:

https://www.irs.gov/publications/p535

[Leetpurple]

Thanks so much for your helpful replies.  I usually don't ask a question I don't know the answer to, but I thought maybe your expertise had something I was not aware of.