IRS Provides Welcome Relief on Timing of Bad Debt Deductions

Financial Institutions

July 01, 2015
by Susan Rammer, CPA

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Susan Rammer Susan Rammer, CPA
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The Commissioner of the Internal Revenue Service (IRS) recently issued guidance to IRS examiners related to bad debt deductions.  The guidance, in the form of a directive, provides welcome relief to banks and bank subsidiaries by simplifying the IRS’s approach to auditing this area and eliminating some of the controversy related to bad debt deductions.
 
The directive acknowledges that determining worthlessness under the current IRS regulations may impose a “significant burden” on banks and bank subsidiaries, as well as the IRS examiners.  According to the IRS, its purpose is to increase efficiency in resolving bad debt deduction issues for banks and bank subsidiaries and to more efficiently manage IRS resources.  (A directive provides examiners guidance while performing an exam but is not an official pronouncement of law.) 

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