Can I write off and send to collections the same unpaid invoice?
Yes, you can generally write off and send to collections the same invoice. The IRS expects reasonable collection steps before a debt is worthless, so placement often comes first. If you deduct it and the agency later recovers money, that recovery is generally income up to the amount deducted that reduced your tax.
Order to write off and send to collections
- Place the account.
- Document outcomes.
- Charge it off when worthless[source].
- Report any later recovery as income[source].
When should I write off an unpaid invoice?
In the year it becomes worthless[source].
Does writing off forgive the debt?
No; it’s a tax and accounting step. The customer still owes.
Can I use a reserve for bad debts?
Generally no for tax; the reserve method was repealed[source].
What records should I keep?
Invoices, collection notes and agency reports.
General information, not tax advice. Tax rules depend on your accounting method and facts; confirm with a tax professional.
Related answers
Bad debt deduction · Can invoices be written off?
Getting ready to place an account? Use the free collection toolkit or browse all write-offs & taxes answers.
Get matched: agency, attorney, AI or certified firm
Tell us about the unpaid invoice and choose a preferred option, or let us recommend one: AI/automated collection, a collection attorney, a collection agency (local or national), or an IACC member, CLLA-certified or ACA International member agency. Matching is free, and nothing is placed until you approve a partner’s written terms.
Prefer email? Write to [email protected].
Frequently asked questions
Should I tell the customer I wrote it off?
No need; it doesn’t change what they owe.
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”; 26 U.S.C. § 166 (bad debts), via Cornell LII (accessed Oct 18, 2026).
Owed money by another business?
Tell us about the unpaid invoice and we’ll match you with an experienced collection partner suited to its size, age and location. Matching is free.
Get matched with a collection partner