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Collection Agency


Hospital or Clinics have bad debts those balance physician office will move to collection agency, we are going to review how physician office will move the balance to collection and how it works.

Bad Debts
Bad debt is accounts receivable that will likely remain noncollectable and will be written off. Bad debt appears as an expense on the company's income statement, thus reducing net income. So we are moving the uncollectable balance to collection agency by adjusting off the balance from our books.

How to find out the bad Debts  
Bad Debts can be considered in so many ways but in Medical Billing if we are unable to collect the debts for more than 120 days plus we are naming it as Bad Debts, we are just reviewing the general Medical Billing process its depend on hospital to hospital some hospital will calculate for every six months or one year so on.

Bab Debt & Tax
Some types of bad debts expense, whether business or non business related, are considered deductible under section 166 of the Internal Revenue Code provides the qualification which must be met in order to meet the deductible status.

Criteria for deduction
To be considered as deductible, debts:
  • must be a bona fide debt, and
  • worthless within the taxable year.
A debt is defined as a debt which arises from a debtor-creditor relationship based upon a valid and enforceable obligation to pay a determinable sum of money. The debt in question must also be considered worthless. This distinction is further broken down into the level of collectibles. One must determine whether the qualifying debt is completely or partially worthless. A partially worthless status means a portion of the debt may be recovered in future periods. Numerous factors are taken into consideration including the debtor’s insolvency status, health conditions, credit standing.

Collection Agency
Collection agency may buy your debts with some percentage, for example if you have $100 bad debts collection agency will give $60 upfront and take your debts the other method is they will fix some percentage for example if you have $100 bad debts if they are collecting your bad debts they take some percentage and pay you the reaming balance.

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