Report a nonbusiness bad debt on form 8949
Follow these steps to report a nonbusiness bad debt on Form 949. Refer to Publication 550 for more information about bad debt.
- Open theB&Dscreen in theIncomefolder, then theSchedule for detailstatement.
- Select3 Box C or F - Not reported on 1099-Bin the 8949 Box column.
- SelectN Nonbusinessin the Type column.
- Enter the name of the debtor andbad debt statement attachedin the Desc column.tipIf you run out of space, abbreviate the debtor name.
- EnterWrthlessin the Date Acq'd and Date Sold columns.
- Make sure that1displays in the 1=S, 2=L, 3=28% column. If it doesn't, select1 Short-termin the Force column.
- Enter the basis of the bad debt in the Cost/Basis column.
- Enter0in the Sales Price column.
- Per Publication 550, attach a statement to the tax return for each bad debt. The statement needs to contain the following:
- A description of the debt, including the amount, and the date it became due.
- The name of the debtor, and any business or family relationship between the taxpayer and the debtor.
- The efforts the taxpayer made to collect the debt.
- The reason that the taxpayer decided the debt was worthless. For example, show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt.
