US Income Tax Deduction for Theft Losses

US Income Tax Deduction for Theft Losses

If you have been a victim of 419 Scam, you might be entitled to a tax deduction, consult your tax professional. Here is an article that explains the rules and limitations: http://www.investopedia.com/articles/taxes/08/itemized-deduction.asp

Here are a few key quotes from Investopedia:
How to deduct:

“Casualty and theft losses are miscellaneous itemized deductions that are reported on IRS Form 4684, which carries over to the Schedule A, then to the 1040 form. Therefore, in order for any casualty or theft loss to be deductible, the taxpayer must be able to itemize deductions. If this is not possible, then no loss can be claimed.”

Rules and limitations:

“In order for a theft loss to be deductible, the taxpayer must prove that the loss was due to theft - mere suspicion of theft will not suffice.”

Therefore, it is important to file a police report and retain copies of all receipts, emails and IM conversations that discuss the exchange of funds.

“There are other conditions that must be met as well, such as the $100 floor and the 10% adjusted gross income limitation. A separate $100 floor is subtracted from each loss, and then the remaining amounts are totaled. The IRS has mandated that any amount in excess of the 10% annual gross income limitation is then deductible. Any amount that is reimbursed by insurance is not deductible, and any amount that is reimbursed by insurance in a later year must be declared as income.”

The IRS Forms, instructions and related publications can be found here: http://www.irs.gov/formspubs/index.html