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Ponzi Scheme CPA discusses Investment Fraud tax deduction through Form 4684 Part II, Casualties and Thefts

Ponzi Scheme CPA Form 4684 Part II

Ponzi schemes are one type of investment fraud. The IRS allows special treatment of investment fraud losses. (910) 399-2705.

The public uses “Ponzi scheme” to describe all investment fraud. Most CPAs don’t see much of Ponzi scheme losses. I think our virtual office just draws from a larger client base than a traditional brick and mortar CPA. I started receiving calls from potential clients, and tax preparers, the first day I posted on Form 4684 Part II, Casualties and Thefts. Sad but true. I’m still amazed at how much investment fraud exists. Clients tell me TurboTax and other tax programs don’t handle Part II of Form 4684, or need a manual workaround. Some Clients say the Form 4684 instructions aren’t easy to understand.

So what’s special about using IRS tax Form 4684 Part II Casualties and Thefts?

It turns investment fraud losses into an ordinary income tax deduction. More deduction and fewer restrictions. You can carry it forward to future tax years or amend prior tax returns (or file Form 1045) to carry it back. Lots of IRS wrinkles of course.

Schedule A, Itemized Deductions, Casualty Loss: Line 20 has a 10% threshold and phases out as your adjusted gross income (for Form 1040) increases. An investment fraud CPA would only use line 20 of Schedule A if you don’t qualify for Form 4684 part II, Casualties and Thefts.

Please read any of our Form 4684, Ponzi Scheme or investment fraud posts to get a feel for how we handle this tax specialty.



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