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Can we deduct $20,000 we were scammed out of?

Forum|Forum|6 years ago
June 5, 2019
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TurboTax Free Edition Online

Best answer by rjs

You might be able to deduct it as a theft loss, but there are a lot of limitations, so the deduction might not amount to anything. First of all, if you have insurance that covers theft, you must file an insurance claim. Most homeowners insurance includes theft coverage. The loss that you can claim on your tax return is only the amount that was not reimbursed by your insurance.

In calculating the deduction for a theft loss, you first have to subtract $100 from the unreimbursed amount of the loss. Then you have to subtract 10% of your Adjusted Gross Income (AGI). What's left after those subtractions is the amount you can deduct.

If you still have something to deduct, a theft loss is an itemized deduction. To get any tax benefit from the deduction, your total itemized deductions, including the deductible portion of the theft loss, have to be more than your standard deduction.

If you think you can take a deduction for the theft loss, see IRS Publication 547 for more details about the deduction, including the proof of loss that you will need. You can download Pub. 547 from the following link.

http://www.irs.gov/pub/irs-pdf/p547.pdf

Here's how to enter a theft loss in TurboTax.

Click the Federal Taxes tab.
Click Deductions & Credits.
Click "I'll choose what I work on" or "Jump to a full list."
On the screen "Your 2017 Deductions & Credits," scroll all the way down to the last section, "Other Deductions and Credits."
Click the Start, Update, or Revisit button for Casualties and Thefts.

Finally, when you posted your question you indicated that you are using TurboTax Free Edition. You cannot claim itemized deductions in Free Edition. You would have to upgrade to Deluxe or higher, or use any edition of the CD/Download TurboTax software.

rjsAnswer

Employee

You might be able to deduct it as a theft loss, but there are a lot of limitations, so the deduction might not amount to anything. First of all, if you have insurance that covers theft, you must file an insurance claim. Most homeowners insurance includes theft coverage. The loss that you can claim on your tax return is only the amount that was not reimbursed by your insurance.

In calculating the deduction for a theft loss, you first have to subtract $100 from the unreimbursed amount of the loss. Then you have to subtract 10% of your Adjusted Gross Income (AGI). What's left after those subtractions is the amount you can deduct.

If you still have something to deduct, a theft loss is an itemized deduction. To get any tax benefit from the deduction, your total itemized deductions, including the deductible portion of the theft loss, have to be more than your standard deduction.

If you think you can take a deduction for the theft loss, see IRS Publication 547 for more details about the deduction, including the proof of loss that you will need. You can download Pub. 547 from the following link.

http://www.irs.gov/pub/irs-pdf/p547.pdf

Here's how to enter a theft loss in TurboTax.

Click the Federal Taxes tab.
Click Deductions & Credits.
Click "I'll choose what I work on" or "Jump to a full list."
On the screen "Your 2017 Deductions & Credits," scroll all the way down to the last section, "Other Deductions and Credits."
Click the Start, Update, or Revisit button for Casualties and Thefts.

Finally, when you posted your question you indicated that you are using TurboTax Free Edition. You cannot claim itemized deductions in Free Edition. You would have to upgrade to Deluxe or higher, or use any edition of the CD/Download TurboTax software.

W

wwDogBagsAndMore

Turbotax does not have; Revisit button for Casualties and Thefts. Not a thing about casualties, It does have something about theft but only for items but not monetary! You have to enter the what item, cost and date of purchase. So, Now what?

F

friscomiller

Previously, IRS announced special relief for victims of fraudulent investment arrangements like Bernard Madoff's Ponzi scheme that was discovered in 2008. I was told that the IRS announced that investors can take an ordinary loss deduction and the deduction isn't subject to the pre-2018/post-2025 2%-of-adjusted-gross -income (AGI) limit on miscellaneous itemized deductions, the income-based limitation on itemized deductions, or the 10% of AGI limitation on the deduction for casualty losses.

Taxpayers can deduct the loss in the year the theft was discovered. This deduction can be taken if the loss isn't covered by a claim for reimbursement or other recovery that has a reasonable chance of occurring.

This is all the info I have. If anyone can tell me HOW to take this deduction, I would appreciate it. I was a victim of an investment scam and lost $20K

E

ecilay

hi friscomiller, so what is the answer to this exempt of pre-2018/post-2025 2%-of-adjusted-gross -income (AGI) ?

K

klma

Employee

I know this is an old post, but I'd like to share my experience with this topic. I had to amend my Dad's 2017 return to put in a loss for a Ponzi-scheme that he got sucked into. I've been using Turbotax forever, so I thought it would be easy to just amend the 2017 return and add Form 4684 using the interview questions. However, I got a message saying that Turbotax (I was using Home & Business) does not let you do Form 4684 for theft. I ended up having to buy H&R Block Premium, redoing the 2017 tax return so that I could then amend the 2017 tax return. It was a MAJOR hassle and headache - particularly since the #'s between the two returns on the original 2017 tax return for some reason were coming out differently (because of K-1's I think). Anyway, all this to say that if others have this same problem they are going to have to find something other than Turbotax to do their taxes... and like people have said, from 2018-2025 Ponzi-scheme losses can't be written off. Even though Turbotax failed me on this, after using H&R Block software I DEFINITELY still find Turbotax to be a far superior program to work with.

R

rwbjr

IRS Form 4684 is available in HRB Premium and Business for tax year 2020. Part II states " I am claiming a theft loss deduction pursuant to Revenue Procedure 2009-2020 from a specified fraudulent arrangement conducted by the following individual or entity". I anticipate completing this form for the loss I incurred due to an online scam and see if I get called in. I have documentation from my bank as well as local police.

A

Anonymous

@rwbjr It's available on TurboTax too but as you've been told already it will not help you. You can no longer deduct these types of losses except in very limited circumstances, and you do not appear to have one of those circumstances (for example you can deduct the loss against a very rare thing called a casualty gain but you don't have one of those.)

The loss isn't deductible. It's tragic, but your personal loss is not tax-deductible. You cannot deduct this, using any software or even if you go in-person to HRB.

Revenue procedure 2009-20 (it's -20 not -2020) was issued and valid in 2009 and through 2017 but the tax law changes in 2017 make it useless to you now.

D

DJCantello2

Were you able to get anything back on your scam situation? We had $80,000 loss last year. Trying to figure things out.

AmyC

Employee

Theft losses may be deductible. See the updated Jan 2022 version Topic No. 515 Casualty, Disaster, and Theft Losses - Internal Revenue Service for full details. Which includes:

Theft Losses

A theft is the taking and removal of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and must have been done with criminal intent. The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.

@DJCantello2

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X

xiaoliling2

What does it means? I had the similar simulation for wire scam when I purchase investment property

L

Lgdavis1234

I was scammed 16900.00 from a fake broker can I deduct that somewhere on my taxes

P

PattiF

After the Tax Cuts and Jobs Act was passed into law (2017), many forms of casualty losses that were previously deductible on Form 4684 (like Ponzi schemes and scams) no longer qualify as tax deductions. Per IRS Tax Topic 515, the only deductible casualty losses must be from a federally declared disaster.

Unfortunately, you are not able to deduct anything on your tax return.

@Lgdavis1234

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T

TaxAnn1

please see this link, https://www.irs.gov/newsroom/help-for-victims-of-ponzi-investment-schemes

J

jennifer_ho1

Can you please tell me how do you get money back? I really need some help on this same scammed money?

X

xmasbaby0

Employee

@jennifer_ho1 Some SPAM was removed from an earlier post in this thread. If you suffered a loss from a Ponzi type scheme, you can enter the loss. Other kinds of theft or casualty losses are not deductible on a federal tax return, per the tax laws that went into effect for 2018 and beyond.

https://ttlc.intuit.com/questions/4482873-which-federal-tax-deductions-have-been-suspended-by-tax-reform

And....think about this.....if you have already been scammed out of a significant amount of money, do you want to risk being scammed again by a random person posting in this user forum?

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**