Can you write off losses to your 401K if they were due to fraud from within the corporation? How is it done?

Question

Pls list any tax code or other references if known. (example: Fraud by the Rite Aid CEO)

Answer 1

No...though you or your plan sponsor should make sure that you are part of any class action lawsuit. That way you can at least get something back into the plan. Any deposits from such a suit get deposited as earnings and not included as a contribution for you or anyone else.

If your 401k was over-invested in a stock and it was common knowledge that fraud was occurring or if the trustees knew it was occurring then you might have a case against the trustees...ie enron. But, good luck proving that unless it's your own company and company stock. Even then you'd likely have to wait for the civil suits to progress before you file an ERISA lawsuit (Federal courts).

Answer 2

No losses inside of the 401K or any other retirement plan are never deductible for tax purposes.
You should be contacting the U.S. Department of Labor ERISA enforcement division to file a complaint. The DOL has been charged with enforcing this law since it was passed in 1974. They will investigate the plan and sue the trustees and perhaps the company in order to recover any funds and related earnings lost as a result of fraud.

Answer 3

The tax income on the loss is that she's taxed in user-friendly words on the money she takes out, no longer the money that she had that evaporated. contained in the not likely adventure that that is a Roth (meaning she paid taxes at the same time as she rolled the money over), then she has foundation, yet you in user-friendly words comprehend the loss once you ultimately close all of her Roth charges (it would want to get better contained in the intervening time) or perhaps then that is a awful agenda A deduction.

Answer 4

No, but you may have options through the courts or the SEC.

Since the deposits to the fund were untaxed there's no tax issues due to losses.