write off "bad debt"

[BobMane]

WA State:

If we paid an accounting firm to do books in 2007 and later found the work was horrible/erroneous, causing us months of internal problems and incurring new CPA fees to clean it up, can we claim what we paid them as a bad debt or a loss of some other sort on our taxes?

It has really hurt our productivity but we don't have the money to sue them, we just want to write off the fees we paid so we can apply the fees to a new and competent firm.

 

[LdiJ]

WA State:

If we paid an accounting firm to do books in 2007 and later found the work was horrible/erroneous, causing us months of internal problems and incurring new CPA fees to clean it up, can we claim what we paid them as a bad debt or a loss of some other sort on our taxes?

It has really hurt our productivity but we don't have the money to sue them, we just want to write off the fees we paid so we can apply the fees to a new and competent firm.

Since the fees were a deductible expense anyway, you already get or got a deduction for them, therefore no, you can't "double dip".

 

[Dandy Don]

Talk to a business law attorney about your options for getting/collecting damages against this firm. They may have insurance that could pay for the judgment.

 

[BobMane]

Since the fees were a deductible expense anyway, you already get or got a deduction for them, therefore no, you can't "double dip".

I get what you are saying, thanks.

deductions VS credits VS exemptions, NOL?

Is the fact that we have spent several months fixing our books internally (instead of producing new products) + now hiring various professionals to help us finish fixing them not some other kind of loss?

 

[LdiJ]

I get what you are saying, thanks.

deductions VS credits VS exemptions, NOL?

Is the fact that we have spent several months fixing our books internally (instead of producing new products) + now hiring various professionals to help us finish fixing them not some other kind of loss?

If your business ends up at an overall loss because you were not able to be as productive, then you will have net operating loss carryforwards, and/or you will be able to offset other income (depending on what type of entity you are) If your business makes less money because you were not able to be as productive, you will have less taxable income.

In other words, the expenses of the business are already tax deductible, and if you earn less income, you pay less tax.

Basically you want to get to deduct/get a credit for etc., something for which you are already receiving a tax break. You are trying to "double dip" and you don't get to do that.

 

[BobMane]

I understand that I cant double dip and that makes perfect sense.

I am a LLC, Single Member.

"If your business ends up at an overall loss because you were not able to be as productive, then you will have net operating loss carryforwards, and/or you will be able to offset other income (depending on what type of entity you are)".

Do businesses quantify NOL due to productivity loss into real numbers- that they then claim? Or are you saying the productivity loss yields less taxable income and therefore is not otherwise quantified?

 

[tranquility]

I don't know where this has spiraled to, but let's bring it back.

1. The accounting fees have already been deducted as an expense. They cannot be deducted again.

2. You may have a cause of action against the accountant. However, malpractice is hard to prove and damages harder.

3. Everything else, losses, gains or whatever are treated the same, taxwise, without regard to the reason--including if the reason is accounting error.

4. You don't get a loss for earning less than you think you should have.

 

[BobMane]

Alright, thanks much. this forum is wonderful.