| How do I deduct a theft/embezzlement loss? |
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A reader asks: This year my business lost money to an employee embezzling funds. How do I deduct that? Can I add it to a 1099 for them? My answer: Where you deduct the loss varies depending upon whether your business is a sole proprietorship, corporation, etc. But the embezzlement will be deducted as a Theft loss (and generally listed in the "Other Expenses" category on the tax return). IRS Publication 547 has more information. Want to learn more about the entity-selection decision? Take a look at my related book: Surprisingly Simple: LLC vs. S-Corp vs. C-Corp Explained in 100 Pages or Less. |
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