Writing off balance and sending a 1099 to the patient

There is a lot of misinformation out there about whether or not you can send an IRS form 1099-C to a patient when you write off their account balance as a bad debt.

Form 1099-C is a Cancellation of Debt form.  The IRS instructions state "if a federal government agency, certain agencies connected to the Federal Government, financial institution, credit union, or an organization having a significant trade or business of lending money (such a finance or credit card company) cancels or forgives a debt you owe of $600 or more, this form must be provided".

Sending this form to a patient when you write off their account balance is INCORRECT and could get you in some serious trouble if the patient is angry enough to pursue it.

ADVICE: If you really want to collect the money, take the patient to small claims court………this is a very successful tactic used by many medical practices.

Have questions? I’m here to help.

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About Reed Tinsley, CPA

As a top advisor to physicians, I help increase practice profits by delivering hands-on, expert medical accounting/tax support, practice counsel, and revenue-building strategies. Read More >

Reed Tinsley, CPA