Stolen check to subcontractors (Small Business)

[ftadrowski]

Our small business had two large checks stolen in 2022 to subcontractors. The money was recorded coming in as a receipt. We paid part of the money in back in 2022 to subcontractors while the two banks were fighting over the issue. The money was put back into account in 2023 and the subcontractors were completely paid. 

Can the loss be claimed? 

[VolvoGirl]

I'm having a hard time following that.  But if the money was put back then how is it a loss?  Were the 2 checks, checks your business wrote to the subcontractors?  Or checks you received? 

Don't understand....The money was recorded coming in as a receipt.

[NCperson]

@ftadrowski - VERY hard to folllow what you are stating.

sounds like 2 outgoing checks were never deposited by subcontractors - because they were stolen and can I assume they were cashed? (so the money left your bank account?) 

then you paid the subcontractors AGAIN in 2022, so the subs were 'whole' but you were still missing the money on the stolen checks. 

Then you were paid back by the banks in 2023.

What loss are you trying to claim?  you were made whole!!!! 

I guess you could argue to take the loss for the stolen checks in 2022 (because that was cash out of your business), but if you do that you would need to report the bank's compensation back to you as revenue in 2023. 

If you were confident you were going to get reimbursed by the banks, I don't see there is any loss or any timing difference.  

<<The money was recorded coming in as a receipt. >> this is the revenue from your client, right? it has nothing to do with the situation. 

[ftadrowski]

The money was recorded in 2022 as income. The checks to subcontractors were cashed by the thieves. It took over 9 months for the bank to return the money into our business account (in 2023).  If I cannot deduce the loss, then there will be a recorded large income to shareholders. 

[NCperson]

practically, I don't see the issue - but hopefully others will weigh in.

in 2022, you received revenue from clients and turned around and paid sub-contractors.  The profit is taxable.  No problems here. 

but the checks to the sub-contractors were stolen and cashed.  So you issued another set of checks which the sub-contractors cashed. 

If you had a reasonable expectation of getting reimbursed for the stolen checks from the Bank that is simply a receivable.  That  receivable was zeroed out by the Banks in 2023. 

where is the loss??????