You Are Entitled to Tax Deductions for Identity Theft Losses

Most tax payers see the IRS as evil ogres that takes a little (or a lot) of your hard earned money every paycheck and sometimes they pinch you for a little more at the end of the year.

But if you are a victim of Identity Theft who followed every avenue to recover your stolen money and still are looking at substantial financial losses, the IRS may be your new best friend.

Loss of property due to Identity Theft may be tax-deductible. According to the IRS, “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.”

Now, before you start adding stolen credit card charges or fraudulent applications as a tax write off, this Tax Rule is very specific to losses only. If the financial institution does not hold you responsible for the loan taken out in your name or your home owners insurance pays for your losses, you cannot claim it as a loss.

Generally most financial institutions will not hold victims of Identity Theft responsible for fraudulent crimes committed against them. This is part of the Fair and Accurate Credit Transactions Act.

Also most Federal and State Laws protect the victims of fraud. But that doesn’t mean you won’t take financial losses.

You may have a theft loss claim if you are the victim of

I would strongly recommend speaking to a qualified tax preparer before submitting this tax loss and being prepared with the correct forms and documentation will make it easier for everyone involved.

Things you will need:

The IRS provides Telephone Assistance and Taxpayer Assistance Centers a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

Being a victim of Identity Theft does not mean you should take financial losses. Remember to place fraud alerts on your credit files with the Annual Credit Report and monitor your public reports at LexisNexis.

For more useful information regarding Identity Theft, have a look at these other articles.

Mark Fullbright
Mark is an ICFE CITRMS® Certified Identity Theft Advocate. His experience includes over 20 years in Financial Crimes, with his specialty (and his favorite) being his dedication to helping the victims of Identity Theft.