Can I deduct a cash basis unpaid invoice?
Generally no. With a cash basis unpaid invoice, you never reported the amount as income, so the IRS doesn’t let you deduct it as a bad debt; it says cash-method taxpayers can’t deduct uncollected fees. Out-of-pocket costs of the job may still be deductible business expenses. Ask a tax professional.
Why isn’t a cash basis unpaid invoice deductible?
There’s no income to offset[source].
What about my costs?
Ordinary and necessary expenses may be deductible[source].
Is it different for accrual businesses?
Yes; see business bad debt deduction.
General information, not tax advice. Tax rules depend on your accounting method and facts; confirm with a tax professional.
Related answers
Bad debt deduction · Fees deductible
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Frequently asked questions
Can I switch methods?
Changing accounting methods has IRS rules; ask a professional.
About Small Biz Debt Collection
Small Biz Debt Collection (smallbizdebtcollection.com) is a free matching service that connects U.S. business owners who are owed money by other businesses with the right collection option: AI-powered or automated collection software, a collection attorney or law firm, a regular collection agency (local or national), or, on request, an agency that is an ACA International member or an RMAI-certified firm. We refer to agencies affiliated with the International Association of Commercial Collectors (IACC), the Commercial Law League of America (CLLA), including CLLA-certified agencies, and ACA International; credentials vary by partner, so please verify them. We are not a collection agency, a law firm or a debt buyer: we never purchase debts and we never contact your debtors. Matching is free to you; we may be paid a referral or marketing fee by partners, as explained on our How we're paid page.
Sources: IRS Topic No. 453, Bad Debt Deduction; IRS Publication 334 (2025), Tax Guide for Small Business, ch. 8 “Bad Debts” (accessed Oct 18, 2026).
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