Involved in a crypto currency scam. I was asked to complete tasks where I need to buy BTC and transfer to their account. I lost 15K in 2024 and 68K in 2025. Tax help plz

[Sojin]

How should I submit these details for filing Tax. Whether it comes under 1) Crypto loss 2) Theft 3) Business loss Please suggest how to proceed with this situation.

[JamesG1]

Is your cryptocurrency investment a personal investment or do you maintain a business activity (such as mining)?  What was the nature of the transaction.  Please clarify.

In reference to a theft, note that for tax years 2018 through 2025, casualty and theft losses of personal use property are deductible only if the losses are attributable to a federally declared disaster.  Could that apply to you?

IRS Publication 547 Casualties, Disasters, and Thefts, page 6 states:

Theft 

A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. You don’t need to show a conviction for theft. Theft includes the taking of money or property by the following means. 

• Blackmail. 
• Burglary. 
• Embezzlement. 
• Extortion. 
• Kidnapping for ransom. 
• Larceny. 
• Robbery. 

The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. 

Theft loss deduction limited

For tax years 2018 through 2025, if you are an individual, casualty and theft losses of personal-use property are deductible only if the losses are attributable to a federally declared disaster (federal casualty loss).

[Sojin]

Hi James,

Thanks for responding.

I didn't start to buy the BTC/ETH as an investment, but bought it to complete the tasks. I don't have any more BTC/ETH in my wallet as I have transferred everything to their account which they specified.

Scam Details

The scammers have approached me as a part time job offer in which I need to perform App optimization on their website. As part of this, I would need to buy the apps using BTC or ETH, and then I need to transfer it to the account which their customer support suggested. I was offered $200 per day, but I never got any amount, but they were adding the balances on their website, and always said I could withdraw as soon as I complete the tasks. But they were giving some excuses whenever I was asking for withdrawal.

Whether this would be considered as Crypto loss or Theft or anything else?

Also, now I have got 1099-B form from CashApp for 2024 transactions. Whether I should fill that information while filing tax?

[JamesG1]

What does the CashApp 1099-B report?  Does it report the complete balances transferred?  Or something else?

Review this IRS Tax Topic 515 that may apply since you considered yourself engaging in for-profit enterprise.

TurboTax Best answer states that TurboTax Desktop Home and Business would be required to claim such a loss but IRS form 4684 Casualties and Thefts is not yet available.

The loss appears to be reported on Schedule 1 Additional Income and Adjustments to Income.

IRS Topic No. 515 Casualty, Disaster and Theft Losses states

Personal casualty losses are losses from casualty, disaster, and theft that are not connected to a trade or business, or a transaction entered into for profit. Generally, if the loss is caused by a federally declared disaster, you may deduct personal casualty losses relating to your home, household items, and vehicles on your federal income tax return. For tax years 2018 through 2025, personal casualty losses are otherwise not deductible. A theft loss deduction is generally available, however, if the loss is due to theft related to a transaction entered into for profit. You may not deduct casualty and theft losses covered by insurance, unless you file a timely claim for reimbursement, and you reduce the loss by the amount of any reimbursement or expected reimbursement. 

Further it states:

Theft losses

A theft is the taking and removal of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and must have been done with criminal intent. The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero. For tax years 2018 through 2025, individual taxpayers with theft losses are allowed a deduction if the loss is due to theft related to a transaction entered into for profit.

[Sojin]

Hi James,

As part of the initial task completion, they have send me $55, which is the only transaction details on the 1099-B form. After that, they didn't made any transactions to me and was asking to complete the tasks and withdraw full amount after that. But they were giving excuses that, I missed to complete the tasks (Needs to buy apps and review it) on time, hence it the account got hold, and many other excuses. So, do I need to report this 1099-B form for 2024 tax filing?

Also on the theft loss, since this have been done with criminal intent, whether I could apply it in the form 4684, Sch B?

Also since majority of the amount (68k) is lost in 2025, and only 15k in 2024, whether I should do this itemized tax deduction while filing tax for 2025? And if I can do it for 2025 tax filing, whether I could include the 2024 transaction also?

[JamesG1]

So, for 2024, you bought their apps using BTC or ETH expecting to get the BTC or ETH back and expecting to be paid $200 / day.  You were only paid $55.  You have an IRS form 1099-B from CashApp reporting these transactions in the amount of $15,000.  Is this correct?

You have additional activity of $68,000 that will be reported for 2025.

Have you talked to legal counsel about this matter?

IRS Topic 515 states:

Theft losses are generally deductible in the year you discover the property was stolen unless you have a reasonable prospect of recovery through a claim for reimbursement. In that case, no deduction is available until the taxable year in which you can determine with reasonable certainty whether or not you'll receive such reimbursement.

If you believe that you qualify for under the theft rules, retain a record of your correspondence with the other party.  

IRS Topic says that the taking must be illegal under the law of the state where it occurred.  You may need to engage law enforcement to investigate your theft and bolster your claim with the IRS.