Shakespeare wrote…
“Neither a borrower nor a lender be.”
That may be good advice in theory, but in practice you may want to make a loan to an employee who’s going through tough times.
Lending money to an employee can be a thoughtful act that builds loyalty, but it can also put you in a tough spot if the debt goes unpaid.
If you want to learn how to protect yourself financially and from a tax perspective, don’t miss my new article titled Tax Tips: Five Steps to Take When Lending Money to Employees.
Three ways our fact-filled article can help you:
- You’ll learn the right way to deduct your bad debts. The IRS lets you deduct your bad debts in the year they become worthless. But you’ll have to prove two things. We’ll tell you what they are when you read the full article.
- We’ll tell you how to pick the right interest rate. The fact is, you need to charge your employee interest on your loan. If you don’t, the IRS treats the discount for “deficient interest” as additional compensation to your employee. Ouch! We’ll help you stay out of trouble when you read the full article.
- We’ll explain the two kinds of bad-debt deductions. There’s an important distinction to be made between business debt and non-business debt. Which category does a debt from a bad loan to an employee fall into? You’ll get a clear answer when you read the full article.