How To Recover Ponzi Scheme Losses (BCC, USI) From The IRS Legally
I know it seems like all bad news when you get suckered. But unlike that time my fiancee rented an apartment in NYC that didn't exist from a scammer with a fake key, you can actually recover a portion of your losses legally, and without bribing the NYPD out of your slush fund.
Here are (some of) the concerns you must address on your tax return, if you have a loss from one of the "lending coin ponzis", such as Bitconnect, USI-Tech, RegalCoin, HextraCoin, EthConnect, etc.
#1. You may deduct your losses on pyramid schemes entered into for-profit as a casualty/theft loss using IRS Form 4684 Casualties and Thefts.
Odd coincidence there, by the way - a Turbo Tax "pro" citing a Steemit article!
#2. You must file your losses in the year "they were discovered by the taxpayer" per TurboTax, or in some cases "when substantially realized and no form of recovery is likely". This may require....careful explanation of the facts to determine when you, personally, felt you would not receive your principal back. You'll hope that this is Fiscal Year 2017.
#3. If you do not file in Fiscal Year 2017, you're going to get hit with a nasty tax law change. Starting in 2018, you can no longer carry-back a net operating loss to previous years, recovering your previously paid taxes. You may only carry it forward indefinitely, which means you will not receive tax relief immediately and such relief will be dependent on your future earnings. One should be careful to file legally and in a timely fashion, but you definitely want to realize losses in 2017 if possible.
#4. Safe Harbor law. Use it. In exchange for giving up 5% of your claimed losses (and only claiming 95% of your loss as a deduction), the IRS essentially agrees to use the "kid gloves" on you. Safe harbor filings are excluded from many requirements of proof that could result in you being audited later for the mistakes you should have paid a crypto-accountant (which doesn't really exist, catch-22 IRS?) to not make in the first place.
Both the IRS and the courts will also look upon your case more favorably if filed under Safe Harbor, just in case you are audited (a not unlikely scenario when carrying back large losses.)
#5. File an extension if you need one; they are free and easy to get.
"OK Lexiconical, that's a lot of talking and such, but how about some step by step instructions?"
Sure. Right from the IRS, post Bernie-Madoff:
Have fun reopening those old wounds. At least you'll be paid (back) for it!
Disclosure: I am not a currently practicing accountant.
We also have a Radio Station! (click me)
...and a 10,000+ active user Discord Chat Server! (click me)
Sources: Google, @cryptotax, https://steemit.com/money/@cryptotax/was-your-bitcoin-stolen-potential-tax-benefits-for-your-loss, TaxAct, TurboTax, IRS.gov, Investopedia, Bloomberg, Steemit, ThompsonCoburn
Copyright: SmartSteem, PALNet, SPL, Tax Act, TurboTax, IRS, ThompsonCoburn
Simply don't get involved in one in the first place.
Congratulations! Your submission earned you 0.001 SBD from this bounty. You have received 0.000 SBD from the creator of the bounty and 0.001 SBD from the community!
This isn't very helpful advice for this topic.
Timely and quality piece, this should of easily made it to the trending page as I am sure quite a few people would find this information quite useful... On on flip side, well the tax filing is a complicated process there appears to be some benefits... Well folks like me who suffered losses don't have the headache of filing, I miss out on the silver lining big time
Congratulations! Your submission earned you 0.001 SBD from this bounty. You have received 0.000 SBD from the creator of the bounty and 0.001 SBD from the community!
It's a very difficult process to figure your deductions this way. I helped a business who had several years of NOL handle a carryback like this and it literally took us months to reconcile expenses doing a deep dive through boxes of receipts. You don't have that problem with crypto thanks to block explorers, but you are still looking at a lot of confusing IRS form work.
Hey @beanz
Care to explain why you hit and run-flagged this article with no explanation?
Do you have something against victims of fraud receiving accurate tax information?
Do you like increasing people's tax liability to morally bankrupt governments, so they can buy more bombs and oppress more people?
The possible motivations for such a position are pretty much all bad. What's your malfunction?
Congratulations! Your submission earned you 0.001 SBD from this bounty. You have received 0.000 SBD from the creator of the bounty and 0.001 SBD from the community!
legally? wow, ok..
D.
Well if all of you invested in Steemit instead on shit coins,you all would be rich! :)
Lol. I'm ashamed to say I was in BCC, I wish I had discovered Steemit before I did BCC, I'd have abit more SP and probably zero loss.
Oh well, I guess its true what they say, everything happens for good. Steemit is actually teaching me to value hard work, commitment, persistence, communication skills and most importantly never to fall for get rich quick schemes.
This is a very relatable post. Great job!
Those who had lost funds from USI Tech & Bitconnect they can recover their losses from
a very good investment plan which is running from past 11 months.
For more INFORM follow me in steemit
@Suresh Bhuvan
"I'm ashamed to say I was in BCC,"
There's room for something crazy in every portfolio - just keep it small enough to lose!
You got that right! Thank you xo
Hi lexiconical,
Perfect timing for this the valuable tax info since I have been in ICOs that were ponzi scheme. This help me initially to least know there may be a recourse. Thanks.
You want to recover u r loss then
For more INFORM follow me in steemit
@SureshBhuvan
Thank you, but I really should have gotten this out earlier for everyone. So busy.
Extensions are free and easy to get - file for one if you need it!
Note to mention you can file an amendment for up to 3 years if you actually wanted to
Great article and very informative, thanks for sharing. I've smashed the upvote button for you!
If you are looking to get hold of some crypto without investing or mining, look into https://www.crowdholding.com. They are a co-creation platform were you get rewarded for giving feedback to crypto startups on the platform. You can earn Crowdholding's token as well as DeepOnion, ITT, Smartcash and many other ERC-20 tokens.
Thanks alot!
Very useful and informative!
upvoted and followed you..
You got a 25.29% upvote from @postpromoter courtesy of @lexiconical!
Want to promote your posts too? Check out the Steem Bot Tracker website for more info. If you would like to support the development of @postpromoter and the bot tracker please vote for @yabapmatt for witness!