IRS Form 4684 walkthrough (Casualty & Theft Losses)
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- เผยแพร่เมื่อ 12 มิ.ย. 2023
- Use Form 4684 to report gains and losses from casualties and thefts. Attach Form 4684 to your tax return.
Definitions
Three types of casualty losses are described in these instructions.
Federal Casualty Losses
Disaster Losses
Qualified Disaster Losses
All three types of losses refer to federally declared disasters, but the requirements for each loss vary.
A federally declared disaster is a disaster determined by the President of the United States to warrant assistance by the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). A federally declared disaster includes (a) a major disaster declaration, or (b) an emergency declaration under the Stafford Act.
Federal casualty loss. A federal casualty loss is an individual’s casualty or theft loss of personal-use property that is attributable to a federally declared disaster. The casualty loss must occur in a state receiving a federal disaster declaration. If you suffered a federal casualty loss, you are eligible to claim a casualty loss deduction. If you suffered a casualty or theft loss of personal-use property that was not attributable to a federally declared disaster, it is not a federal casualty loss, and you may not claim a casualty loss deduction unless the exception applies.
Disaster loss. A disaster loss is a loss that is attributable to a federally declared disaster and that occurs in an area eligible for assistance pursuant to the Presidential declaration. The disaster loss must occur in a county eligible for public or individual assistance (or both). Disaster losses are not limited to individual personal-use property and may be claimed for individual business or income-producing property and by corporations, S corporations, and partnerships. If you suffered a disaster loss, you are eligible to claim a casualty loss deduction and to elect to claim the loss in the preceding tax year. See Disaster Losses, later.
Qualified disaster loss. A qualified disaster loss also includes an individual's casualty or theft loss of personal-use property attributable to:
A major disaster declared by the President under section 401 of the Stafford Act in 2016;
Hurricane Harvey;
Tropical Storm Harvey;
Hurricane Irma;
Hurricane Maria;
The California wildfires in 2017 and January 2018;
A major disaster that was declared by the President under section 401 of the Stafford Act and that occurred in 2018 and before December 21, 2019, and continued no later than January 19, 2020 (except those attributable to the California wildfires in January 2018 that received prior relief); and
A major disaster that was declared by the President during the period between January 1, 2020, and February 25, 2021. Also, this disaster must have an incident period that began on or after December 28, 2019, and on or before December 27, 2020. However, this change does not include those losses attributable to any major disaster which has been declared only by reason of COVID-19.
If you suffered a qualified disaster loss, you are eligible to claim a casualty loss deduction, to elect to claim the loss in the preceding tax year, and to deduct the loss without itemizing other deductions on Schedule A (Form 1040).
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Hi :-) Thanks for the great video. Do you have any resources for reporting the recovery of previously claimed Ponzi losses reported on 4684? Thanks!
Unfortunately, I do not. However, Revenue Ruling 2009-09 states: "The qualified investor may have income or an additional deduction in a year subsequent to the discovery year depending on the actual amount of the loss that is eventually recovered. See § 1.165-1(d); Rev. Rul. 2009-9."
In other words, if you took the deduction in one year, but eventually recovered more than the amount of your deduction, then the *excess* would be considered taxable income. I believe this would be reported as extra income on Line 8z of Schedule 1:
IRS Schedule 1, Additional Income and Adjustments to Income
Article: www.teachmepersonalfinance.com/irs-schedule-1-instructions/
Video: th-cam.com/video/TUMnegmniDI/w-d-xo.html
We had Ponzi investment total lost $120k in 2023. Can I file a partial lost this year for 2023 and the rest amount file in next year? If yes, if I claim $58k this year, Is that I supposed to enter $58k in line 40 and $60k in line 41?
Thank you for your help.
In general, a casualty loss (or in this case, theft loss), that exceeds your taxable income would create a net operating loss, or NOL). Taxpayers can carryforward NOLs for up to 20 years, or carry back NOLs for up to 2 years.
However, there are specific rules that you would need to follow to be compliant--I cannot tell whether or not what you proposed is correct without being able to look at your entire tax return. Because of the dollar value at stake, I strongly recommend that you work with a tax professional, who can help you:
1. Determine whether or not you meet the strict IRS criteria to actually deduct your investment loss, based on existing Ponzi scheme reporting rules
2. Decide how to report this on your current year tax return
3. Determine how to carryforward or carry back your loss to the appropriate tax year
I received assistance from FEMA for a tornado that damaged a lot of my belongings in my rent home . Do I need to file this on my tax return ?
You do not *need* to file IRS Form 4684. However, you *can* do so, if you wish to list any unreimbursed damages as an itemized deduction on your tax return. Here are a couple of considerations:
1. Your disaster loss must be a federally declared disaster, to be deductible. You will have to list the FEMA disaster declaration number, which you can probably find here: www.fema.gov/disasters
2. You cannot claim losses for expenses that you were reimbursed for. So if insurance reimbursed you for damage, you cannot claim that as a loss on your tax return.
3. You must itemize deductions on Schedule A (see below for additional resources) in order to claim any loss. If your loss does not equal or exceed the standard deduction, then you might not get any extra benefit out of reporting it.
IRS Schedule A, Itemized Deductions
Article: www.teachmepersonalfinance.com/irs-schedule-a-instructions/
Video: th-cam.com/video/-7YUwQ6Q1LI/w-d-xo.html
Playlist: th-cam.com/play/PLYHzJrFFCrpy1rgmUyp_4JMBnBvphyqB6.html
@@teachmepersonalfinance2169 thank you so much
What a great instruction. I suffered 60,000 damage from Hurricane Ian on 9/28/22 (DR-4673). My insurance covered all except my deductible of 10,080. Is there a reference that I can find if the 10,080 I paid out of pocket is allowable? Thanks
Your $10,080 is deductible. According to the form instructions, amounts not covered by insurance are deductible, if you properly filed your insurance claim, and if the disaster is a federally declared disaster (such as Hurricane Ian).
Thanks, You are really a caring person.@@teachmepersonalfinance2169
Ian is a Federal declared disaster DR-4673 but HR-1331 (qualified disaster) has not been acted on so line 15 has me confused. I file 1040 SR every year so I may not be eligible due to the 10%. I think lines15,16 and 18 for me may be 0 @@teachmepersonalfinance2169
Ian has not been declared a "qualified" disaster yet.@@teachmepersonalfinance2169
Morty you had NO damage they didn't cover? I find that surprising
Hi, if the Ponzi scheme has been filed in Form 4684, Section C; with 95% deductible can be used against the total income. The loss can be carried over for the next 20 years if the loss is larger than the income. Where/what section/number that we can enter for the carryover loss? Should we manually keep track and enter the carryover loss in ques. 40 (Initial investment) section C or still keep the original amount loss as filed in previous year there, and enter the carryover loss in somewhere else ? Thank you so much if you can help!
So your Form 4684 goes to Schedule A. You can only incorporate this into your tax return if you itemize your tax deductions (which I assume you will) on Schedule A. If this generates an net operating loss for your Form 1040, you'll have to complete the NOL deduction worksheet located in IRS Publication 536, on Worksheet 1 (www.irs.gov/publications/p536). You can then use the NOL carryforward on Schedule 1 as an adjustment to income until you use it.
Below are some more resources on Schedule A and Schedule 1 (sorry I haven't done the NOL worksheet walkthrough video yet, but have put it on my list).
IRS Schedule A, Itemized Deductions
Article: www.teachmepersonalfinance.com/irs-schedule-a-instructions/
Video: th-cam.com/video/-7YUwQ6Q1LI/w-d-xo.html
Playlist: th-cam.com/play/PLYHzJrFFCrpy1rgmUyp_4JMBnBvphyqB6.html
IRS Schedule 1, Additional Income and Adjustments to Income
Article: www.teachmepersonalfinance.com/irs-schedule-1-instructions/
Video: th-cam.com/video/TUMnegmniDI/w-d-xo.html
@@teachmepersonalfinance2169 Thanks so much for your prompted response! I'll look into it and hope I can figure it out. As you mentioned, when you get a chance to create a NOL worksheet walkthru video, I'd definitely check it out.
@@teachmepersonalfinance2169 Hi, I have followed your instructions and saw that we can put in the carryover loss from the previous year by entering the negative number (-) of amount that was left to carry forward for the current & next years in form 1040, section 21: Other income (NOL). The next question is: Should we still have to declare the total loss in Form 4684 Section C (Casualty & Theft Loss) for the current & next years as we did in the first year of filing the loss while filing the Carryover/Carryforward Loss? How do we refer the data to IRS that the Carryover Loss is the amount deducted from the loss of the last years? Thanks very much!
Great video. I had a tree fall thru my home which I purchased in 1996 for $116,000. I did several improvements including an addition (which was the only part damaged) in 2004 for another $111,000. The lowest estimate I got to repair the home was for $282,000 which they completed. My insurance paid $268,000 and I paid the remainder. Since the original amount plus addition was less than the amount it cost to fix, I am coming up with owing money rather than being able to deduct. The current value of the house is $485,000. I understand that there is a $500,000 exclusion for married couples but we had hoped to sell the house next year. What advise can you give me?
Unless your tree damage was directly related to a named federal disaster (see: www.fema.gov/disaster), then you can't deduct the expenses that came out of pocket. Unless you say differently, I'll side-step this issue and get to the next one: how this might impact your home sale next year.
For married couples who have lived in and owned the home for 2 of the previous 5 years (assuming this fits your situation), then you can exclude up to $500,000 of the capital gain related to the sale of your residence.
You would be able to increase the tax basis of your home by the amount of repair/renovation that came out of pocket, but I don't think that's necessary. This is a hypothetical example of how your home sale might go next year:
Home cost: $116K + $111K = $227K
Home sale proceeds: $485K - selling costs (let's assume 6% commission, no other costs) = $455,900
$455,900 - $227,000 = $228,900 capital gains
This would all be tax free, even without taking into consideration the increase in basis from your home repairs. Unless there's something missing from this situation, I think you'd be okay to sell your home next year without having to worry about significant capital gains from the sale of your primary residence.
@@teachmepersonalfinance2169 Thanks for clearing that up. The damage was directly related to declared disaster DR-4683-CA and our county was included in the disaster designated area.
What if I did not get any proceeds from insurance company and had to take out a SBA loan for repairs? Can I still qualify to claim on tax return for federal declared disaster as a casualties loss?
Under these conditions, it appears that you would be able to claim the loss on your tax return. If you took out an SBA loan, it would appear that this would be a business loss. If so, you would want to complete Section B, not Section A.
Thanks for replying. But I should have stated it's an SBA disaster loan. I have one more question I purchased my home for $134,000(2016). Market value before was $155,000. the loan was about $60k. How do I determine the after-market value? Again, thank you so much for your help it's greatly appreciated!
@@daddiesgirl68 Your market value will depend on market conditions.
However, if you're asking about tax basis, then the basis would include the original cost of the home plus any money spent on improvements or upgrades (not simple repairs, but repairs that might have increased the market value of the home, such as upgraded storm windows).
@teachmepersonalfinance2169 Okay, thanks for the information.
Hi, I had a deck collapse in a severe storm that happened in CA in 2023. Insurance denied the claim stating that the deck did not have proper footing to begin with but did acknowledge that the weight of the snow from the winter storm ultimately caused the deck to collapse. The estimated repair costs are 55k. Can I claim this as a casualty?
If you filed a timely insurance claim and your storm was on the federal government's list of declared disasters (www.fema.gov/disaster), then you should be able to claim the loss on Form 4684.
I filed an IRS form 2009-20, what if my loss is significantly more than my income. Can I continue to claim this loss in the upcoming year(s), until all (75% of my loss) has been fully deducted? I'm seeking an expert accountant in this situation to help me file the income tax return. Please let me know. Thank you very much.
If your loss is more than your income, and it is allowed, then you may have a net operating loss to carry back or carry forward. IRS Publication 536 contains more details, but you should discuss with your new accountant how you will deduct your casualty loss, and in which tax years you plan to do so.
I had my vehicle stolen and totaled. The vehicle didn't have any insurance on it and I still pay for it monthly (financed). I have the stolen / accident report, does this form apply to me?
Unfortunately, I don't think that you'd be able to use this form. According to the form instructions:
For tax years 2018 through 2025, if you are an individual, casualty or theft losses of personal-use property are deductible only if the loss is attributable to a federally declared disaster.
my car was stolen, recovered, and I paid a $1000 deductible to my car insurance towards repairs. does this form apply to me?
There are a couple of loopholes that you would have to jump through.
First, for tax years 2018 through 2025, the theft or casualty must be due to a federally declared disaster or a qualified disaster loss.
Second, for a federally declared disaster, your deduction is subject to a $100 floor, and only the amount of your loss that exceeds 10% of your AGI is deductible. In other words, the first $100 doesn't count. For a qualified disaster loss, the 10% AGI restriction is removed, but the $100 floor becomes a $500 floor.
Third, you must be able to itemize deductions on Schedule A. Many taxpayers find that their standard deduction exceeds their itemized deductions. Here's some more information on Schedule A for reference purposes:
IRS Schedule A, Itemized Deductions
Article: www.teachmepersonalfinance.com/irs-schedule-a-instructions/
Video: th-cam.com/video/-7YUwQ6Q1LI/w-d-xo.html
A waste management company totaled my legally parked work van (being used in business) with the truck's mechanical arm. I received an insurance check from my insurance company for the blue book value (the van was completely paid off with plenty of life left in it) I had to spend out of the company's coffers twice the insurance amount to get a replacement work van (plus time lost) and get it back up and running. The company is fighting me on responsibility -- their worker was at fault, not trained, whatever. (I'm pro se and no attorney will take the case b/c it is too "small" and too big for small claims court) How would this be reported?
From a tax perspective, I don't see a lot of options for you, particularly with this form. You may be able to claim a capital loss (or have to claim a capital gain), depending on the tax basis remaining on the van compared to your insurance proceeds.
However, you would be tracking your basis (and depreciation) on IRS Form 4562. You would report the disposition of your van as if were a sale on IRS Form 4797.
IRS Form 4562, Depreciation and Amortization
Article: www.teachmepersonalfinance.com/irs-form-4562-instructions/
Video: th-cam.com/video/ysxPWH4P8x4/w-d-xo.html
IRS Form 4797, Sales of Business Property
Article: www.teachmepersonalfinance.com/irs-form-4797-instructions/
Video: th-cam.com/video/2eEaDPh97Zc/w-d-xo.html
You would then treat the purchase of your replacement van as if it were a new asset, then claim depreciation deductions on the new van for the year it was placed into service.
This doesn't feel really good, but it's probably the best that you would get (I believe) in this situation. You should hire an accountant to help you with this, because these are not easy forms for a layperson (much less a business owner who should be focusing on their business) to complete. Also, a tax professional might have some insight into your options that I don't currently have.
@@teachmepersonalfinance2169 Thank you. We are on a cash basis not accrual and are a "micro" business. Very small so I'm the accountant. We depreciate our large capital improvement expenditures on our rental properties (schedule E) and on our other vehicles (all paid for) Have not yet made the move to an S corp and probably won't since DH wants to keep the biz small.
Can you claim a "theft" for fees that were paid to an attorney that were stolen when she embezzled the money and then committed suicide? The law firm ended up closing and no one received their money back.
I'm sorry for your loss. I highly doubt that you'd be able to claim this on IRS Form 4684.
However, if there was a considerable sum of money at stake, you may consider contacting the IRS to see if there is another option available to you, or to see if there's another way to claim this loss that might not be apparent in the form instructions.
Thank you, I will check into it.
Please feel free to check out our article, where we've written step by step instructions to help you walk through this tax form! www.teachmepersonalfinance.com/irs-form-4684-instructions/
If you’re looking for tutorials for other IRS Forms that you can file directly through the IRS website, check out our free fillable forms page: www.teachmepersonalfinance.com/free-fillable-tax-forms/
Thank you, do you know any accountant that specialize in Ponzi Scheme or can you help me with this?
I had 1.3m in crypto stolen from my wallet, can I use this form?
The IRS' Taxpayer Advocate site says yes. However, the guidance on HOW to deduct stolen crypto depends on a lot of factors outside the scope of this video or form. I've attached the link to the Taxpayer Advocate Service article, as well as the IRS publications that contain additional detail.
www.taxpayeradvocate.irs.gov/news/tas-tax-tip-when-can-you-deduct-digital-asset-investment-losses/
www.irs.gov/taxtopics/tc515
www.irs.gov/forms-pubs/about-publication-547
Can I use this form for crypto scam?
You *may* be able to, depending on the circumstances. Here is a link to the IRS Taxpayer Advocate page with a little more information and resources to help you: www.taxpayeradvocate.irs.gov/news/tax-tips/tas-tax-tip-when-can-you-deduct-digital-asset-investment-losses/2023/10/
Sorry Form 4684