Go Back

Schedule a Consultation

 

1613 Fruitville Road - Sarasota, FL 34236 - 941.328.3993 Get Directions

Ponzi SchemeTax Issues

Victim of a Ponzi Scheme? Get Help with Subsequent Tax Issues

A Ponzi scheme is a fraudulent financial arrangement that pays investors using their own funds or funds from subsequent investors, rather than from company profits. Victims will have reported income that did not exist and will have paid income tax on money not actually possessed. Because of the unusual nature of this type of fraud and the fact that you paid tax on non-existent income, there are actually separate tax laws that regulate how your losses from such investments are treated.

Recently, dozens of Ponzi schemes have been uncovered, and thousands of investors have realized that they were victims of this type of fraud. If you believe you are among them, attorney Jo Ann Koontz and CPA Marina Parkin can guide you through the regulations that have been put in place to protect you

Ordinary Theft Loss for Victims of Ponzi Schemes

One of the things the IRS did to help victims of Ponzi schemes was to put measures in place which would entitle them to an ordinary theft loss rather than a capital loss. This theft loss is not restricted to the standard $3,000 deduction per year against ordinary income as a capital loss would be. Because investing in a fraudulent organization affects your income for years, victims are allowed to carry back the Net Operating Loss (NOL) to the last 2 years or carry the loss forward to use against other ordinary income in the future. Note that you are not permitted to claim theft losses for bad decisions made by an investment advisor; these losses fall under capital losses.

Determining what qualifies for ordinary theft loss and calculating the full extent of your losses can be quite complex. Fortunately, the Sarasota accounting firm of Koontz & Parkin, CPAs are familiar with these calculations and are committed to using their expertise to help Ponzi scheme victims overcome the damage.

Ask Your Sarasota CPA about Safe-Harbor Treatment for Ponzi Scheme Victims

In addition to ordinary theft loss measures, the IRS has also established a safe-harbor route for victims to calculate and deduct theft losses and to determine the precise year in which the losses occurred. This route also makes it easier and faster for the IRS to process these cases.

The safe-harbor regulations allow up to 95% of the losses to be deducted, excluding any actual recovery or recovery from an insurance company. The 95% applies to investors suing the promoters of a Ponzi scheme; investors suing a third party are eligible for a 75% recovery.

In order to take advantage of a safe-harbor treatment, you must meet a number of administrative requirements. Koontz & Parkin, CPAs will help you calculate your losses and the tax impact so that you can get your life back on track.

Call Sarasota Accountants Koontz & Parkin, CPAs for Help with Tax Issues Unique to Ponzi Schemes

Jo Ann M. Koontz and Marina Parkin offer a powerful combination of in-depth knowledge of tax regulations and years of experience representing clients. To schedule a consultation, call the Sarasota office of Koontz & Parkin, CPAs at 941.328.3993.