Form 4684: Casualties and Thefts
Form 4684 is an IRS form for reporting gains or losses from fatalities and thefts, which may be deducted for itemizing taxpayers. Fires, floods, and other disasters cause casualties. Losses are usually deductible in the tax year in which they occurred. If theft occurs, the tax year is the year of loss discovery.
Casualties and Theft Form 4684: Casualties and Thefts—Who Can File?
Please file Form 4684 for casualty or theft gains or losses. Form 4684 can be used to claim a loss for homeowners who were notified to demolish or move a structure after a federal disaster. These individuals might claim the pre- and post-event house value difference. The building authority must notify the owner within 120 days of the disaster area declaration.
Only losses to personal property due to a governmental disaster are deductible. This rule is waived for personal casualty gains by the IRS. In that situation, the taxpayer can balance earnings with casualty and theft losses unrelated to a government disaster. Taxpayers in federally declared disaster regions do not need to itemize deductions for Form 4684. Taxpayers cannot deduct personal injury expenditures on Form 4684.
IRS Form 4684 is online.
This form usually pertains to personal losses, not business property injuries and thefts.
After determining that your casualties or thefts qualify for a deduction, attach Form 4684 to your return or an amended return for a past claim. Complete Form 4684, Section D, to deduct federally designated disaster losses from the previous tax year.
Casualties and Theft Form 4684: Special Considerations
Form 4684 authorizes event-specific non-reimbursed losses. Deductible casualty losses must be sudden, unexpected, or extraordinary and occur during a federally declared catastrophe. Earthquakes, fires, floods, and storms cause casualties. Other disasters include vandalism, vehicle accidents, and shipwrecks. Assistance for persons experiencing losses from corrosive drywall and caustic pyrrhotite concrete is available.
Some bankrupt or insolvent financial institutions can lose deposits as a casualty. Losses from Ponzi schemes can be deducted in certain situations. Form 4684’s Section C covers financial loss deductions.
Damage alone may not be deductible as casualty loss. A termite infestation or mold and fungi invasion of a home is not a casualty loss because it is an ongoing process. Damages from an automobile collision are not deductible if the taxpayer was deliberately negligent.
Embezzlement and larceny are theft losses. If stealing is a crime in the state where the occurrence occurred and someone acted with criminal intent, these losses qualify. In some cases, fraud is theft. If illegal executive wrongdoing lowers a company’s stock price, damages may not be deductible. However, these losses may result in a capital loss, which can reduce taxable income or offset capital gains.
Federal Disaster Areas and Form 4684 (Casualties and Theft)
Section D of IRS Form 4684 covers federally declared disaster damages. Qualified disaster losses are deductible in the tax year they occur, unlike casualty losses. Federal disaster losses are deductible in the prior tax year and provide additional tax benefits. Losses must occur in geographically designated disaster zones to qualify.
According to the IRS, a “qualified disaster loss” for 2021 is a person’s casualty or theft of personal property due to a major disaster that the president declared between January 1, 2020, and February 25, 2021. To qualify, the major disaster must have occurred between December 28, 2019, and December 27, 2020 (inclusive). The considerable disaster incident period must terminate by January 26, 2021. However, this amendment does not cover losses from a significant disaster declared solely due to COVID-19.”
- Form 4684 is an IRS form for reporting losses or gains from federally declared disasters. It may be deductible for taxpayers who itemize deductions.
- Taxpayers in federally declared disaster regions do not need to itemize deductions for Form 4684.
- Any abrupt, unexpected, or uncommon event like a flood, storm, tornado, fire, earthquake, or volcanic eruption can damage, destroy, or cause you to lose your property.