Bad Signing Agencies | Unpaid Signings | Tax Tips

This month's General Mentorship that talked about Slow to Pay and Non-Paying Signing Agencies which sparked a great question- are Notaries allowed to write-off bad debts like we hear about at other companies? We are not Tax professionals here at Notary Stars so we reached out to our good friends at Notary Assist and to Glen Hill, The Tax Lady to get an answer and here is what we found out: Notaries cannot write off bad debt because they don't actually have a loss (although you may beg to differ) because our businesses are on a cash basis and not an accrual basis. Cash basis lets businesses record income and expenses only when cash is actually received or paid. Accrual accounting involves tracking income and expenses as they are incurred (when an invoice is sent, or a bill received) instead of when money actually changes hands. An unpaid invoice on a cash-based method of accounting cannot be written off as a bad debt. Essentially, the notary cannot include it as income since they were never paid, and therefore did not pay taxes on that income either. Most (if not all) accounting software allows us to identify it as an uncollectable invoice. Now, the good news is we can still write off the cost for mileage, supplies, and applicable expenses. In other words, we cannot write it off as bad debt BUT & AND we get to write off expenses associated with it even if we never received payment. It some cases, this is a better write off than the bad debt process, including proving to the IRS our documented collection efforts. Some notaries may think we can write if off because some small businesses get to write off returns. However, we do not provide merchandise or products that can be returned. We provide a service to the public and having unpaid invoices does come with the industry. This is even more of a reason to be diligent in our record-keeping for all of our expenses as business owners. READ ALL OF THIS YEAR'S TAX TIPS BY CLICKING HERE: https://www.notarystars.com/blog/notary-tax-tip-space-equipment-rentals-purchases https://www.notarystars.com/blog/can-signing-agents-write-off-meals-on-taxes-yes-and-it-pays-to-eat-in-2023-as-long-as-you-do-things-properly https://www.notarystars.com/blog/mileage-for-notary-business-owners https://www.notarystars.com/blog/bad-signing-agencies-unpaid-signings-tax-tips https://www.notarystars.com/blog/tax-tips-from-sue-hope-glen-hill https://www.notarystars.com/blog/tax-tips-from-sue-hope-glen-hill-january-2023 https://www.notarystars.com/blog/your-notary-loan-signing-agent-business-tax-time