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Want to claim your bad debt as a tax deduction? Here's how to prove to SARS that you tried to reclaim it first

by , 18 August 2014
SARS won't let you claim a bad debt as a tax deduction unless you can prove you tried to reclaim the amount from your creditor.

It's only once you've done everything you possibly can to get the money out of your creditor that you can really say that debt is bad. It's at this point that SARS will give you the nod to claim it as a tax deduction.

But how do you prove this to SARS?

Read on to discover the answer to that question...

 

You must prove to SARS that you did everything to try reclaim your bad debt

 
Your process of reclaiming bad debt from your creditors should include:
 
- Reminder letter;
- First warning;
- Second warning;
- Final warning;
- Phone call; and
- Visit. 
 
Here's how to prove you've done all this.
 
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What do SARS and CIPC say about accounting reports?
 
 
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Here's how to prove what measures you took to reclaim your bad debts

 
- Keep copies of all the letters of notification you sent to your creditor;
- Make recordings of your phone calls with your creditor (just remember to tell the creditor about the recording)
- Keep a logbook that shows if you traveled out to your creditor's home or place of work;
- If your creditor went into liquidation, get a copy of their notice of liquidation to prove to SARS that you can't reclaim the money from them.
 
If you can prove you've done all this to SARS, it'll have no reason to reject your claim for a bad debt tax deduction.
 

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