I think we have been down this road. You don't understand the tax code.
If the tax code means charging you $200,000 for a $50,000 procedure and claiming a net $100,000 loss, when I write your bill down by $100,000....instead of claiming a $50,000 gain ($100,000 revenue - $50,000 expense)
Then you're right, I don't understand YOUR tax code.
Feel free to post IRS info that backs your claim. Or not. Again.
OK for the last time.
the hospital creates a bill for 250K, it is submitted to your insurance carrier or medicare/medicaid. the hospital is paid 75K and shows a net loss of 175K, it doesn't matter what they actually spent on your treatment (for IRS purposes). Its not complicated.
another example. you go to a department store and buy $200 worth of clothes, and put it on a store credit card. Then you don't pay the bill when it comes in. The store records a loss of $200. It doesn't matter for tax purposes, that they only paid their supplier $50 for the clothes.
the hospital creates a bill for 250K, it is submitted to your insurance carrier or medicare/medicaid. the hospital is paid 75K and shows a net loss of 175K, it doesn't matter what they actually spent on your treatment (for IRS purposes). Its not complicated.
Wow. So wrong.
Ok, use cash accounting, they spent $50,000 on your treatment and insurance pays $75,000.
That's a $25,000 net profit. They'll owe taxes on $25,000.
View attachment 311725
Cash Basis Accounting vs. Accrual Accounting | Bench Accounting
Use accrual accounting, they spent $50,000 on your treatment and bill the insurance company $250,000.
If they expect the insurance company will pay in full, they book a profit of $200,000. They'll owe taxes on $200,000.
If the insurance only pays $75,000 the hospital will write-off the uncollectible $175,000 and this reduces net profit from $200,000 to $25,000. Now they owe taxes on $25,000.
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Allowance for Doubtful Accounts and Bad Debt Expenses | Cornell University Division of Financial Affairs
To prevent wild swings in reported income, the hospital will probably set up a reserve for every bill they submit to that insurance company. If they expect to collect 40% of each bill, they would record the $50,000 expense and $100,000 of income ($250,000 receivable minus the $150,000 in the allowance [or reserve or contra] account)
Initially they report $50,000 net profit.
If they only receive $75,000 they will first reduce the contra account from $150,000 down to zero. No change yet to income. Now they need to also write-off the remaining uncollectible amount of $25,000.
This reduces the initial reported profit of $50,000 down to $25,000.
Both methods, cash and accrual, give the identical taxable result, they owe taxes on $25,000.
Neither result will ever give a loss of $175,000 for tax purposes.
Never, ever, ever.
I hope you've never submitted a corporate return using your faulty understanding. Seriously