Legal Question in Business Law in California

Re: Collections Vs. Write Offs

This is primarily a business and accounting question, not a legal one.

If you are a cash basis taxpayer, then you can deduct your reasonable and necessary expenses, but because you don't report income until you receive it, you cannot "write off" the loss in tax terms. You can "write it off" in terms of not pursuing it, but that's not the same as an income tax deduction. In the unlikely event that you are an accrual basis taxpayer, then the analysis may change, because you may recognize the income when the job is booked, and which case, if you're not paid in full, you need to deduct as uncollectible the amount previously recognized. These are accounting issues, for your accountant.

As to the collections, you can try small claims court, you can try a collection agency (you might try olddebts.com), you can try to collect up-front from now on, or you can just forget about these accounts and move on.