I have been awarded a judgment but cannot seem to collect and the company I sued has gone out of business. Is there any way to write this off as a loss on my taxes instead of trying to collect it?
Matt our CPA responded
With regards to your question of whether you can write off a bad debt it all depends on your accounting method. Normally if you are on the cash method of accounting you would not have included into income the judgement until you received the money. Therefore if you have not included the judgement into income you can not take a deduction for not collecting it.
If you are an accrual basis taxpayer you would have already accrued the judgement into income ( added it to your income). If you have done this than yes you can take a bad debt deduction for the money not collected. More than likely however this is not the case.
I am guessing you have already gotten your attorney involved to aid with collection. You are much better off getting whatever you can than taking a tax deduction anyway.