We had to evict a tenant at our rental property. The court awarded us to be repaid via garnishment from the ex-tenant. We were told this is non-taxable income. Do I leave the tenant's old invoices open in QuickBooks, void or delete them, or apply payment towards them when the checks come in?
I think I should create an income account that is non-taxable, so my accountant and I don't forget, and just add it in the bank feed as such. BUT I don't know if voiding/deleting the original overdue invoices will put me in hot water later on. Is that why it's non-taxable, because we're already being taxed from what was supposed to be paid (accrual basis)?
I'd like to clean up my invoice section so I don't see all that overdue amount in there.
Deciding whether to delete or void your tenant's unpaid invoice or apply the garnishment as payments depend if it needs to be paid by the ex-tenant. Let me share some information on how it works.
Since you're awarded by the court to be repaid using garnishments, there's no need to delete nor void the unpaid invoice. Also, you're on the right track in creating a non-taxable income account and use it in paying the old invoice. I'd recommend consulting your accountant so you'd be guided properly in tracking your invoice payments.
If the invoice will not be paid, you can either void the unpaid invoice so that you'll not be taxed. Otherwise, you can leave it as is and just record a bad debt and write it off.
I'm back to make sure everything is working fine,@DAH83.
Did the information I've provided answers your query about managing your old unpaid tenant invoices? Were you able to clear your former tenant's outstanding balance? If you need further assistance with the process, just leave a comment below. I'll be sure to get back to you.