IRS Question

[k conover]

Okay, my roofing contractor ripped me off and now I have to pay an additional $1200 to fix what he didn't do (not counting the costs and labor I'll have to cover the water stains on the ceilings from him not tarping the roof correctly when he was fixing it.) I know that you can claim an uncollectible debt (up to $3,000 a year) on your federal taxes. Would the fact that I have done everything in my power to collect the additional money I need from him (including sending him a certified letter, notifying the BBB, etc) put this in that category? Any CPA's out there? Kirsten

[m Ransley]

Well the BBB is a joke as you now see 1st hand, IRS ? Take the guy to small claims, file today yourself.

[HeatMan]

Some smart a** suggested sending a contractor a 1099 for income tax purposes. That might fix him....

[P.DINDORF]

Take pictures and make sure you document everything.

showerbeatle

[Doug Miller]

Deduct that $1200 on your tax return, and it reduces your _taxable_income_,

*not* your tax, by $1200. If you are in the 28% tax bracket, for example, the reduction in your tax owed will be 28% of $1200, or $336. You're still out $864.

Sue the contractor for damages and you may recover the whole $1200. Depending on the small-claims threshold in your state, you might not even need a lawyer. If you do hire a lawyer, you can sue for your legal fees in addition to actual damages.

[Art]

If this was for a commercial building then might be tax deductible but not for personal house. Might go into basis when he sells house. Not a bad debt because no formal loan agreement.

_taxable_income_,

[Doug Kanter]

I'm not about to begin poking around Turbotax, but I'd swear I saw a question like "Did you incur any losses due to floods, hurricanes, chipmunk invasions...". Am I dreaming?

[Doug Miller]

Maybe, maybe not, I'm not a tax accountant so I don't know. My point was that recovery of the amount, through civil processes, will yield much more money than deducting it on the tax return ever could. Too many people look at tax deductibility as though it were some sort of magic source of free money. While it's better to incur deductible expenses than non-deductible ones, it's always even better still to avoid incurring the expenses at all.

[Doug Miller]

Not dreaming, it's there. But there's a threshold, IIRC somewhere around 7% of adjusted gross income, and you can deduct only the portion of such losses that exceeds the threshold. It takes a *really* big loss to become deductible. Catastrophic losses are deductible, most losses short of catastrophe aren't. Short version: you're screwed either way.

[Doug Kanter]

Translation: It's for rich people who insist on building houses too close to the beach. :-)

[ryeish]

They don't need it, as FEMA will come in and rebuild them. Take a trip to the Outer Banks of NC and look at the places that have been rebuilt

2 or 3 times over the past 20 years.

[Doug Kanter]

I could be wrong, but my gut feeling says it's not FEMA's job to rebuild million dollar homes.

[Jeff Cochran]

Normally you need a legal claim for collection, such as a judgement in small claims court.

Jeff

[Melinda Meahan - remove TRASH]

Look for the tax newsgroup and ask -- I think it's misc.taxes.moderated, but just search for newsgroups that include the word "tax" and you'll find it.

[Art]

They also like to replace the sand for the rich people. But that might stop because we need to fix the sand we messed up in Iraq.