401K rollover stolen

[jenglenn2005]

We were victims of Oxford scam/theft. Our 401K rollover to a gold 401K was stolen. How do we report loss on taxes?

[Opus 17]

Sorry, there is no deductible loss here, for two reasons.

1. Theft is not deductible for 2018-2025 as a result of the 2017 tax reform, unless the theft occurred as part of a federally declared disaster of some kind.

2. Even if theft losses were deductible, your loss is not deductible because you have no basis in the 401k.  All the contributions and growth was tax-free when it occurred, and whatever you withdraw is taxable.  Your "tax reduction" is that fact that you won't pay taxes now because you have less to withdraw.  You can't deduct something from your taxable income if it was never included in your taxable income in the first place.

[jenglenn2005]

Thank you. To be clear so cannot claim loss but do we need to declare anything? Like if we get form for rollover? Even though it never was deposited?

[Opus 17]

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@jenglenn2005 wrote:

Thank you. To be clear so cannot claim loss but do we need to declare anything? Like if we get form for rollover? Even though it never was deposited?

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If you get a 1099-R for the withdrawal, that will create an issue because it needs to be reported, and "stolen" is not one of the usual options in Turbotax.  I will ask another expert how they think this should be handled. 

@dmertz 

[dmertz]

Since there was a movement of funds from the original 401(k), there was a distribution that is reportable on Form 1099-R and reportable on your tax return.

It's not clear whether the funds actually made it into another qualified retirement account.  If the funds actually made it into another qualified retirement account and were subsequently stolen, the distribution from the original 401(k) is reportable as a rollover.  If the funds never made it to another qualified retirement account, it's reportable as an ordinary distribution from the original 401(k).  

[jenglenn2005]

Again, thank you so much I have been trying to get answers for quite some time (actually since it occurred :(

But I do hope you know the last piece to this puzzle... so going forward what do I do?  The answer is no.  None of the funds every made it to account it was listed to go to.. it just stayed in pending delivery of metals until well it hit the news few months later.   Then the country and all the unfortunate victims got confirmation.  I do not want to be hit with not reporting nor paying taxes on money that is gone??  Again we our gratitude for helping.

God Bless you.

[Opus 17]

@jenglenn2005 

You may need to speak to a professional accountant in your area.  If you had taken a normal distribution, put the money in your checking account, withdrawn it all as cash in a duffel bag, and then the cash was stolen, or lost down a storm drain, or set on fire, you would still owe income tax on the distribution.  If the money was rolled over from plan A to plan B, but it stayed in a cash account with plan B instead of being invested in stocks or metals, and then the owner of plan B stole the money from the account, then it is a rollover.  There's no deduction for the theft, but no tax is owed on the rollover.

You really need to figure out the details of what happened, and you may need professional assistance. 

[jenglenn2005]

Thank you again.  We will consult with CPA etc to make sure we are doing our part.  As for what happened? New CEO/CFO etc allegedly had a scheme in works (allegedly due to ongoing investigations etc) we have filed with all agencies we knew of but slim to none chance; sadly is response we are receiving.  They got people from all over the country.  OXFORD GOLD GROUP - google for stories etc :(

**Also for those reading this that were also involved our hearts go out to you - WE UNDERSTAND and we hope this helps you as well in some way