How Freelancers Can Get Tax Breaks for Clients Who Didn’t Pay
Posted On July 8, 2014
Working as a freelancer can be hard. Your income is not consistent and even when you send out invoices with deadlines to pay you never know whether or not a client is going to pay your invoice on time or at all. However, the good news is freelancers can get tax breaks for clients who did not pay and today we will be discussing how.
Unpaid Invoices Write Off
When filling out your Schedule C, Form 1040, you are able to write off the entire amount of your invoices that have not been paid. This information is reported on Line 6 of the form and it can only be written off if you have already reported the income as being earned. For example, if you recorded the work as a transaction, also known as “accrual accounting” you will be eligible to write off the income. However, if you operate your business on a money basis, meaning you only report the revenue that the client’s actually paid you, writing off unpaid invoices is not an option for you.
As a freelancer, you do not have to take client’s not paying you as a loss. When tax time comes around all you have to do is write off all of your unpaid invoices on Schedule C. Additionally, make sure that you take advantage of the other tax deductions that are available for freelancers, such as travel write offs and the home office deduction.
Make sure you are ready when tax season rolls around! Remember we are Redmond and Bellevue CPAs!