How to claim a deduction for the loss from a fraudulent investment scheme?

You can access Form 4684 with the Desktop version of TurboTax. If you are using TurboTax Online, Please see this TurboTax Help article with information on switching from the Online version to the Desktop version. 

 

To get to the form you would:

• Go to your tax return
• Click Forms in the upper right top of the page
• Then click on Forms in the upper left of the page above TurboTax Premiere 
• Click on Open Form
• Type in 4684 in the Search box
• Choose the last entry, Form 4684 - Casualty & Theft Worksheet, and Click on the blue Open Form Button at the bottom
• Enter the information about the Ponzi scheme and click the box for 5c

Thank you very much for your help!

So it's Ponzi scheme, and it's not limited to those caused by federally declared disasters, right?

This is a theft and has been reported to police department.

Yes, that's correct. Claiming the casualty and theft deduction is not limited to federally declared disasters. 

 

However, if the casualty loss is not the result of a federally declared disaster, you must itemize your deductions to claim the loss. 

• Generally, you itemize deductions on Schedule A of your tax return if your itemized deductible expenses for the year exceed the standard deduction amount for your filing status.

Losses from Ponzi-type investment schemes, page 6 - Special rules may apply to theft losses from Ponzi-type investment schemes. For more information, see the Instructions for Form 4684PDF. Additionally, review Help for Victims of Ponzi Investment Schemes and Publication 547.

To enter your qualified casualty loss in TurboTax, jump to the entry area for casualty loss:

1. Open or continue your return in TurboTax
2. Search for casualty loss and then click the Jump to link in the search results
3. On the Casualties and Thefts screen, select Yes to the question Do you want to work on your 2022 casualties and thefts now?
4. Answer the interview questions describing your event

When you complete the event and reach the Property Summary screen, you can enter any additional property losses by selecting the Add a Property button.

 

Thanks for your information. Is this claim could be done on TurboTax online or it have to be the Desktop version?

You may use TurboTax Online or TurboTax CD/Download versions to calculate the casualty and theft deduction. Both will also generate Form 4684, Casualties and Thefts.

 

Once again, if the casualty loss is not the result of a federally declared disaster, you must be itemize your deductions to claim the loss. 

 

Generally, you itemize deductions on Schedule A of your tax return if your itemized deductible expenses for the year exceed the standard deduction amount for your filing status.