I have questions. The ITR has a category named "losses". How is this accomplished using the transactions report? Does this refer to potential "cash on hand"? If I had a fixed price contract but the funds did not become transformed into cash, do I consider this as a loss?
I did try to search the web for answers. And these are the things that I found:
1. If the security or investment is sold for less than its original purchase price, then the dollar amount of difference is considered a capital loss. If the project is supposed to be won at $200.00 and I end up getting only the first milestone accomplished within the deadline set by the client and this milestone has made me earn $50.00 then I had a capital loss of $150.00.
2. Capital losses can be reported as deductions. So I need to declare $150.00 as one of the deductions.
3. Some losses are realized. Others are unrealized. The latter do not need to be reported in the tax return. How come I failed to realize the latter? Are there accountants on board?
Cussen, M. P. 27 June 2013. Capital Losses and Tax. Retrieved from https://www.investopedia.com/ (Date accessed 26 December 2018).
Not an accountant, but just my 2c. In your example, you mentioned that you took on a task worth 200$, but you only finished a single milestone worth 50$. Meaning that you got your work's worth of 50$, and the 150$ is for the work that was never (or at least shouldn't have been) started in the first place. I would personally just declare that 50$ as income, and forget about the 150$.
Again, not an accountant, but it just wouldn't make sense for any goverment institution to leave a loop hole this big. I dare say nearly everyone would abuse it to hell if it worked like this. Very interested in what the actual accountants think about this; the google searches aren't particularly easy to understand.
Thanks for the response, Abhishek. I am thinking that probably what would be considered as a capital loss would be the dollar difference between what we have actually earned and what we gave back to tha client in the form of a refund.
I see your point in the "loophole". It, probably, won't be realistic.