Theft through deception - California CA540 Adjustment

[hrspep]

I am trying to find out how to fill out the Form 4864 with zero deductible for IRS1040 and one copy of Form 4864 with scammed amount for California. Since it is personal savings and not property, I am not sure how to fill out the worksheet.

Any pointers or link to instructions would be greatly appreciated.

[MayaD]

You can no longer claim theft losses on a tax return unless the loss is attributable to a federally declared disaster.

The deduction for personal casualty or theft losses has been repealed in tax years 2018–2025, unless the loss occurred in a federally-declared disaster area.

Previously, uninsured losses exceeding $100 due to fire, theft, or natural disaster could be deducted if the total loss amount exceeded 10% of the AGI, regardless of location.

[hrspep]

Thanks for your note.

I understand that for federal return, my loss is not qualified for deduction since it is not related to a declared disaster. This is why I noted that the first Form 4864 has zero deductible.

I called California Franchise Tax Board Service Center and they confirmed that I can claim the deduction for my California return. However, Turbo Tax requires two Form 4864: one for federal with zero deductible and another one for the loss as deductible for my California return. Where I am looking for help is how to fill out the Form 4864 since the theft loss is personal savings and not tied to property.

[Cynthiad66]

Your thread has been cut and therefore no background to issue.  Please provide clarifying information for your loss wo that we may assist you.

[hrspep]

Correction: Form 4684 Casualty Loss and Theft (not Form 4864)

Thank you for reaching out.

I incurred a theft through deception (scammed) in 2022 which I cannot claim as deduction for my federal income tax return. Federal tax law requires loss or theft in a declared disaster area so the form needs identification of property.

I was able to get confirmation from California Franchise Tax Board that I can claim my loss for my California return. It is considered theft  of personal savings through deception.

My challenge is that CA540 requires filling out Form 4684 which requires association of loss to a property. In other words, I cannot use Turbo Tax to fill out the Form 4684 since the loss is not tied to a property.

Questions:

a) If I fill out a Form 4684 separately by downloading the form from IRS website, can I import the manually filled form to Turbo Tax and file with California electronically?

b) If I can do the above, do I need to attach the form to my federal return with zero deduction?

Thanks in advance for your help.

[RobertB4444]

No, you can't attach the form to your electronic TurboTax return.  You would have to print and mail it.  And no, you don't need to have the 4684 with zeros attached to your federal return.

@hrspep 

[jngx80]

How did you handle your California return? I'm helping my sister in law who fell for a scam. It appears Form 4684 is only focused on loss of physical property so TurboTax in turn is asking things like the address of the property, cost basis, etc.

I guess I'll just wing it otherwise.

[MonikaK1]

If what was stolen is cash, that is what you report as to the type of property. The loss will not be deductible on the Federal return, if it is not related to a Federally declared disaster, but the information will flow through to the California return. Answer the questions in the California interview about the theft when they appear.

See IRS Topic 515 and this older TurboTax tips article for more information on how to determine whether a theft loss is deductible and for what tax year.

If the "scam" was more along the lines of a Ponzi scheme rather than a simple theft of cash, those types of losses are legally complex and are out of scope for TurboTax; we can't advise how to enter them.  See the link below for more information:

• Calculations TurboTax Doesn't Handle

See the California Schedule CA Instructions. This is the schedule that lists all of the adjustments to income, deductions, etc. for California due to differences from Federal law. Under federal law, the personal casualty and theft loss deduction is suspended due to the Tax Cuts and Jobs Act, with exception for personal casualty gains. Federal law allows a deduction for personal casualty and theft loss incurred in a federally declared disaster. California law does not conform.

California allows personal casualty and theft loss and disaster loss deductions. If you have personal casualty and theft loss and/or disaster loss, complete another federal Form 4684, Casualties and Thefts, using California amounts. Enter the difference between the federal and California amount in column B or column C.

Note that you posted on a thread that has been inactive for two years, so the original posters may not see it.

@jngx80