Understand the exceptions. Victims of Ponzi schemes are still able to claim deductions for their losses, according to Flynt-Barr. Additionally, if you were scammed while engaged in business activities, you may also be eligible for the deduction. Anderle explains, “If the transaction where you lost money was driven by business or financial interests, then you qualify for the deduction. It’s all about intent. If your primary motivation was business-related or entering into a legitimate financial contract, then the loss can be deducted.”
However, the business exception is not straightforward. The exceptions can be complex and difficult to understand, even for tax professionals, as noted in a Senate report.
Consider filing an Offer in Compromise (OIC). An OIC is an option provided by the IRS to settle tax debts for less than the full amount owed. Scam victims facing financial hardships can utilize this option to reduce their tax obligations. However, the process is intricate, time-consuming, and has a low success rate. Anderle mentions a case where an elderly couple lost $1 million in a scam but their OIC was not accepted by the IRS, leading them to have to sell their home, one of their few remaining assets. Appeals are often necessary in these situations.
Seek legal assistance. Challenging the IRS alone can be intimidating, and the OIC program is complex and demanding. Puffer highlights that even attorneys can find the process daunting, as it involves submitting numerous documents. For those unable to afford legal assistance, low-income law clinics may provide support. The IRS offers detailed instructions for the OIC process on its website.
Reach out to lawmakers. If you wish to see the theft deduction reinstated, communicate your concerns to your U.S. senator or representative. Flynt-Barr emphasizes the importance of informing lawmakers to increase the chances of the deduction being included in a future tax bill. Many legislators may not be aware of the issue, so it’s crucial to bring it to their attention.
By advocating for change, there is a possibility that the theft deduction will be addressed in a 2025 tax bill. As a niche topic in tax matters, legislators may need input from constituents to take action.
Understand the exceptions. Victims of Ponzi schemes are still able to claim deductions for their losses, according to Flynt-Barr. Additionally, if you were scammed while engaged in business activities, you may also be eligible for the deduction. Anderle explains, “If the transaction where you lost money was driven by business or financial interests, then you qualify for the deduction. It’s all about intent. If your primary motivation was business-related or entering into a legitimate financial contract, then the loss can be deducted.”
However, the business exception is not straightforward. The exceptions can be complex and difficult to understand, even for tax professionals, as noted in a Senate report.
Consider filing an Offer in Compromise (OIC). An OIC is an option provided by the IRS to settle tax debts for less than the full amount owed. Scam victims facing financial hardships can utilize this option to reduce their tax obligations. However, the process is intricate, time-consuming, and has a low success rate. Anderle mentions a case where an elderly couple lost $1 million in a scam but their OIC was not accepted by the IRS, leading them to have to sell their home, one of their few remaining assets. Appeals are often necessary in these situations.
Seek legal assistance. Challenging the IRS alone can be intimidating, and the OIC program is complex and demanding. Puffer highlights that even attorneys can find the process daunting, as it involves submitting numerous documents. For those unable to afford legal assistance, low-income law clinics may provide support. The IRS offers detailed instructions for the OIC process on its website.
Reach out to lawmakers. If you wish to see the theft deduction reinstated, communicate your concerns to your U.S. senator or representative. Flynt-Barr emphasizes the importance of informing lawmakers to increase the chances of the deduction being included in a future tax bill. Many legislators may not be aware of the issue, so it’s crucial to bring it to their attention.
By advocating for change, there is a possibility that the theft deduction will be addressed in a 2025 tax bill. As a niche topic in tax matters, legislators may need input from constituents to take action.
