Word: theft
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Internal Revenue Service Commissioner Doug Shulman reached out to thousands of Ponzi victims Tuesday by issuing new guidelines for filing tax theft loss deductions...
...likely the IRS will just allow for the theft loss," said Tipograph. "It's not the best option for taxpayers but is a reasonable way to handle this." But if you don't file by April 15, you can lose out on filing for 2005, Tipograph said, since there's a rolling three-year time limit. One can, however, file a "protective refund claim" form, a kind of placeholder that keeps the 2005 return open...
Rough IRS numbers on Madoff's theft alone could total from $7 billion to $10 billion in refunds due to victims, according to accountant tallies. But don't feel too bad for the IRS. Over the past 20 or more years, it has been collecting taxes on income that never actually existed. Last year the IRS sent out 106 million refund checks totaling $254 billion, so Ponzi victims will hardly empty the refund cookie jar. (See pictures of Madoff's demise...
...partner at New York City-based Imowitz Koenig & Co. LLP, an accounting firm specializing in private-equity and feeder hedge funds. According to Tipograph and other tax experts, victims involved in Ponzis have four ways to reclaim taxes paid on fraudulent income, the first being a good old-fashioned "theft loss" deduction, which allows a person to go back three years and reclaim taxes paid. Currently, no deduction can be made on the original investment, especially if an SIPC claim has been made...
...would be forthcoming" - by April 15, one hopes. He suggests a simple approach for both the victims and the IRS. "If the [IRS] were to allow the victim to deduct his or her tax basis, less the SIPC recovery and less a small reserve for other recoveries, as a theft loss on the victim's 2008 tax return, the taxpayer could quantify the loss quickly and file for the appropriate refunds," Goldstein says. "The benefit for the IRS is the consistency of the claims filed, which will make the administration of this deluge of claims easier...