Accounting for Sole Proprietors: Tax & Bookkeeping Tips
in Business, Accounting & Taxes ·
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I'm not sure if anyone actually answered you yet, but I've been wrestling with this exact same mess for a while now. From what I gather, if a small business owner decides to walk away from what customers owe them for goods or services—just because they feel like it—that write-off essentially becomes a kind of deemed income for the year they make that call, per the IRS guidelines. If they've already sued to collect, then it doesn't count as income. In my gut, I think he'd have to pay sales tax on those invoices (though part of me thinks he could just write them off and skip the sales tax, but I might be wrong), plus whatever income tax applies. And I don't think that $1.75 limit even applies here. If I've got this wrong, please, someone set us both straight and help us out 😵
| MARY2001 says: So, we're looking at a sole proprietor who used to be registered for sales tax but opted out back in 2015. Now he's sitting on a bunch of unpaid invoices. They're all under $1667, and since nobody filed a lawsuit over them, can they even be written off? Or am I totally off base there? Maybe he could just claim they were paid... but the thing is, those old invoices from 2010 through 2014 have sales tax baked in at 23% and 25%. How do you even log all that in the accounting software? And if he claims them as paid, does he actually owe taxes on those amounts? 🤔 His previous accountant just left everything hanging, and honestly, now it's my headache to deal with.😵 |