 Most of this information comes from the Tax Guide for Small Business for Individuals Who Use Schedule C, Publication 334, Tax Year 2022, you can find on the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're focused on line one income. Remember, in the first half of the income tax formula is an essence, an income statement. Although just an outline of scaffolding, other forms, schedules flowing into these line items, one of those, the Schedule C, an essence and income statement in and of itself having business income minus business expenses, the net business income rolling into line one income here of the income tax formula. Here's the first page of the Form 1040, noting the Schedule C will in essence roll into the Schedule 1 rolling in then finally to the first page of the Form 1040 here. The Schedule C is the profit or loss from business, which is formatted in the structure of an income statement where we have income and expenses. We are now focused on the expenses side of the equation. So we're focused now on bad debts. So if someone owes you money, you cannot collect, you have a bad debt. So we're talking specifically about bad debt on the business side of things now. So typically that would be a scenario where possibly you did work for someone. For example, on account, they owed you money and then at some future point you've determined you're not going to get paid the money and now you've got this bad debt type of situation. Now note, there could be some difference in how you're going to account for that if you're on an accrual basis versus a cashed basis because on an accrual basis, the basis you would most likely be using from an accounting standpoint. If you're doing work on account, then you would have recorded the revenue when you did the work at some future point. Then if you're not going to collect on it, then you didn't really have the revenue. It's another one of those items where you have a negated kind of revenue situation. So what should you do? Should you reduce the revenue in the current time period? That's not normally what we like to do because we like revenue only to continue going up. The other thing we can do is create like an expense account of bad debt, which is similar to what we saw with returns and allowances situation where say inventory was returned, for example, where we made not an expense but a contra asset account still reducing net income in the same way. If it was a cashed based system, then we would never have recorded the revenue in the first place because even though we did the work, we haven't actually received the revenue. So in that case, when they no longer pay us in the future, we wouldn't have recorded the revenue in the first place, so we wouldn't have an expense necessary to negate the revenue. But most of the time, if you're dealing with a bad debt situation, you might have recorded revenue in the past and in the future when the bad debt becomes due, you might need an expense to compensate for the overreporting of revenue in the past. So there are two kinds of bad debts. You got business bad debt and non-business bad debt. So business bad debt is generally one that comes from operating your trade or business. That's the one you would think you might be having something to do with the schedule C here. So you may be able to deduct business bad debts as an expense on your business tax return. So in other words, if you say, well, I loaned my cousin money just because just out of the kindness of my heart and lo and behold, my cousin who never pays anyone back didn't pay me back. Well, that's not really a business bad debt. You were just you just gave your cousin money again. You should you should stop doing that because the trend has been set at this point in time and you should, you know, recognize that.