Team Up with the IRS

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There’s nothing that could make my blood boil faster than having a client fail to pay for his Radio schedule. While scrupulous attention to accounts receivable can minimize the agony of not getting paid, there are always some accounts that go bad each year, accounting for more lost revenue than you’d like. With the advent of tougher economic times, the likelihood of an increase in bad accounts is something every station will have to face.

Today, while talking with an accountant, I learned that the IRS can be an ally in turning the tables on a deadbeat client.

Technically, when you extend credit to a client, you are loaning him something of value (airtime) in return for a promise to pay. If the client aired a $4,000 schedule and then didn’t pay, when you write off the lost revenue you’re actually giving the client a “gift” of $4,000.

Once a client goes into arrears, the station will proceed with collection measures, up to and possibly including filing legal action to obtain payment. If the client still won’t (or can’t) pay, the station will reluctantly write off the amount as noncollectable. When that happens, it’s called “debt forgiveness”, and the station can now send the client an IRS Form 1099-C…meaning the client will have the amount of his unpaid bill added to his taxes as a “gift” from the station.

There is some effort required on the station’s part, as the form must be filed electronically with the IRS and a paper copy sent to the client. And if the client has gone out of business or declared bankruptcy, it’s a moot point. Check with your accountant to find out if it’s worth it for your station. But if you’re frustrated with a client that has turned into a deadbeat and is now stiffing the station for an expensive schedule you ran in good faith, getting the IRS on your team at least guarantees the client will pay somebody for the time—even if it’s not you.