Discussion:Reporting income from criminal activity?
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| {{ForumReplyPost|UserID=Jdugancpa|Date=9 January 2009|Text=That must be why, as a kid growing up, when I reminded my mom that she owed me $5, her response was always, "Well, I'd rather owe it to you than cheat you out of it." }} | {{ForumReplyPost|UserID=Jdugancpa|Date=9 January 2009|Text=That must be why, as a kid growing up, when I reminded my mom that she owed me $5, her response was always, "Well, I'd rather owe it to you than cheat you out of it." }} | ||
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| + | {{ForumReplyPost|UserID=SCCPA|Date=9 January 2009|Text=He gets a deduction when he pays it back. However, unless he is in the trade or business of being a thief (and he isn't), it is not a business deduction so it does not contribute to an NOL. From a tax standpoint, don't pay it back all in one year unless it's the year of receipt or you may lose much of the deduction.}} | ||
Revision as of 02:30, 9 January 2009
Discussion Forum Index --> Basic Tax Questions --> Reporting income from criminal activity?
Discussion Forum Index --> Tax Questions --> Reporting income from criminal activity?
R.herkelmann (talk|edits) said: | 8 January 2009 |
| I have a client that rents rooms in his home to various persons recovering from this, that, or the other.
A current tennant of his stole (and got away with, long enough to spend) $30k in postal money orders. He was later arrested and sentenced to house arrest, and ordered to make restitution, which he has been making, in the amount of $300. per month. It seems as if this might need to be reported as income, minus restitution paid in the year it occurred, but I am at a loss as to what might be done and how it would be reported. If this IS in fact how it would work, what is the status of the restitution paid in subsequent years? Would this somehow be deductable as an expense? I can't see this as being a wash as a)the person has not YET paid the money back in full, and b) who knows if it will EVER be paid back in full, due to death, disability, or inability to find work. | |
Rgtaxservice (talk|edits) said: | 8 January 2009 |
| Shooting from the hip here - any repayment would be income (recapture) only if the stolen money was deducted as such in the first place.
If this all transpired last year then the stolen cash could on 4684 (less any repayments) and future repayments could be recaptured in future years. Too little info to go on. | |
R.herkelmann (talk|edits) said: | 8 January 2009 |
| Sorry, I was not clear enough in my original question.
I am asking if the stolen funds $30k need to be reported as income by the criminal, since the criminal spent the money already. | |
R.herkelmann (talk|edits) said: | 8 January 2009 |
| But he has not paid it back yet, other than a few thousand dollars. I find it hard to fathom that IRS would make allowances for good intentions. Again, what happens if the guy can't find work or for some other reason loses his ability to make these payments? | |
| 9 January 2009 | |
| Stolen income is included in income when received since he had use of the funds. | |
| 9 January 2009 | |
| That must be why, as a kid growing up, when I reminded my mom that she owed me $5, her response was always, "Well, I'd rather owe it to you than cheat you out of it." | |
| 9 January 2009 | |
| He gets a deduction when he pays it back. However, unless he is in the trade or business of being a thief (and he isn't), it is not a business deduction so it does not contribute to an NOL. From a tax standpoint, don't pay it back all in one year unless it's the year of receipt or you may lose much of the deduction. | |
