We are not tax advisors, the following is an attempt to help folks get started with their tax advisor on how to claim loss (tax deductions) for previous interest claimed from Woodbridge 1099’s.   We believe the correct form for this is 2009-20.  Scroll down to the bottom to find the form. 

What follows is a rundown of how we understand this (form) to work.

According to the revenue procedure, it follows the line items on the Appendix A –  all investments + interest earned (1099-Int) less payments received (including interest paid) less actual recoveries equal deductible loss.

Again, it looks to me that the “discovery date” is December 2017, thus, previous year’s tax returns (where you claimed the 1099 interest – and paid tax) will have to be amended to claim the loss.   The loss is considered a reduction of ordinary income.    If the loss is taken after 2017, then it would be a capital loss which is taxed at the lower rates and limited to $3,000 per year.

The taxpayer does not actually recover the tax paid on the income previously reported, but rather calculates a theft loss in the year of discovery and get a deduction that year which offsets other ordinary income.  

Questions? Leave a comment and we will be happy to help.

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