Adjusting the balance and issuing a 1099 to the patient

Why You Shouldn't Send IRS Form 1099-C to Patients for Bad Debts

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. To ensure your practice navigates the complexities of debt collection and IRS regulations correctly, consult with REED TINSLEY, CPA.

About the Author

Reed Tinsley CPA

This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on accounting & tax, practice management, and financial planning. Schedule a Free Consultation.