An Idea that there is a tick box in the edit Invoice to write off to bad debts account and it automatically does it. Why because it would save time ,not that I have that many and because people ask how to write off bad debts and this way nobody has to explain we can all say look in the guides.
If any other taxing authorities are similar to Australia on the requirements before you can claim a tax deduction for bad debts then a tick box would be insufficient - Deductions for unrecoverable income (bad debts) | Australian Taxation Office
Oh why is that all we have to do is basically move it from accounts receivable to bad debts expense.
Heres an excerpt from IRD tax ruling
A bad debt is a debt where there is no reasonable likelihood that it will be received. In certain circumstances, the bad debt rules allow the creditor (either A or a subsequent holder), to take a deduction for a bad debt where that debt has been written off as bad during the same income year.
Where bad debts have been written off during the year, a tax deduction can only be claimed if:
- the debt is “bad” – ie, there is no reasonable likelihood that the debt will be collected, and
- the appropriate accounting/bookkeeping entries recording the debt as written off have been carried out.
To work out whether the debt is “bad” several factors can be taken into account including whether reasonable steps have been taken to try and collect the debt.
No deduction can be claimed in respect of a provision for doubtful debts.
If a bad debt is recovered and a previous deduction has been claimed for that particular bad debt, the amount recovered must be returned as assessable income for tax. The amount must be returned in the income year in which it is received.
That tick box would hardly be used, I hope, otherwise the business would have to change the ways it is doing business if not wanting to head for bankruptcy. Screen real estate is valuable and what if someone accidentally would click that check box, then still we have to say read the guides, search the forum, etc.
Look at the guides: Write off bad debts | Manager In all instances you need to create the bad-debt account and the only thing you have to do is a journal entry. If for whatever reason the debt gets paid you do a Journal reversal and pay de due taxes.
This is not feasible, @Wornout. Writing off a bad debt involves more than ticking a box, and requirements vary by jurisdiction, accounting method (accrual/cash), and tax implications, which can be complex and affect not only transaction-level taxes like VAT but also income taxes. Write-offs may need to be posted to different accounts.
In short, the decision to write off a debt must be carefully considered, and the steps taken must be tailored to the circumstances. This is simply not something to be accomplished by casually checking a box.
Writing off a bad debt involves more than ticking a box, and requirements vary by jurisdiction, accounting method (accrual/cash), and tax implications, which can be complex and affect not only transaction-level taxes like VAT but also income taxes. Write-offs may need to be posted to different accounts.
Yes I know it involves more than ticking a box I am a Tax accountant .
This is simply not something to be accomplished by casually checking a box.
Yes I realize now that maybe it was a big ask for the ordinary joe business owner who sees thing from business point of view and they have to get an accountant to finish off the accounts, good thing my 4 years of study is put to good use. Also good thing for now NZ tax rules are not quite the same as Australia’s
With this economic decline I have a few clients that we have had to write off a bad debt.
As an experienced tax accountant I am sure you realize that this is strange. The worse the economy the more bad debts happen.