How do I report a loss due to fraud?

January, 07 2015 by Dave Du Val, EA

Hey Dave,

I need help on what form to file with the IRS for 2014 for a fraud case where I lost lots of money. The fraud case was adjudicated and the offender now sits in Fed Prison.

Ralph

 

Ralph,

We are sorry to hear about your loss, but happy to hear that justice has been served in this situation.

First, you need to verify that the loss is deductible in 2014. Generally, theft losses, including fraud cases, are deductible in the later of the year the theft (or fraud) was discovered or the year that the reimbursement amount, if any, can be reasonably determined, or the year it is determined that no reimbursement will be received.

Losses by fraud are considered a theft, and are claimed on Form 4684 Casualties and Thefts. More information is available here.

If the fraud was considered to be a Ponzi scheme, specific rules apply to these losses and you can find more information about this here.

Deductibly Yours,

Dave