I fell for a financial scam. Is there tax relief or other help available?
April 18, 2010
Article in the IndyStar April 18, 2010
After the Bernard Madoff investment scandal broke, the Internal Revenue Service issued guidelines last year on how to file a loss from a criminally fraudulent investment arrangement. Other possible tax-relief strategies exist, and insurance may be available to help protect defrauded investors, but it is strongly advised that you contact a tax adviser for help.
Charlotte Lippert:
In some cases, you may qualify for a tax deduction.
In April 2009, after the Bernard Madoff scandal, the Internal Revenue Service issued guidelines for filing a loss from a criminally fraudulent investment arrangement.
If all the IRS criteria are met, an individual may deduct up to 95 percent of the qualified loss (less if there is the potential to recover funds from a third party), minus any recovery money received and the potential reimbursement from insurance. Since there is some complexity to this process, it is best to use the services of a tax professional if you plan to take the deduction.
To determine your ability to recover your funds, you can contact the U.S. Securities and Exchange Commission and the Securities Investor Protection Corp. Both organizations have informative Web sites.
The SEC is a good resource to determine if action has already been taken against the fraudulent firm. If there is a pending class-action lawsuit, the SEC may provide updated information regarding its status.
If the fraudulent firm has SIPC insurance, you may be eligible to submit an insurance claim. If your situation is in any way unique, you should seek legal counsel.
In the future, be guarded with your funds and where you invest. Look at the credentials and qualifications of your adviser. And, if it sounds too good to be true, it likely is.
