casualty loss taxes?

Question

I joined a company in Oct 2006 and incurred business expenses (which were approved by the CEO) totalling $3500.00 in tax year 2006, of which ZERO was reimbursed to me. The company was also remiss in paying me my salary for a certain period (roughly $7000). In late Jan 2007 the company's assets were foreclosed, the company is no longer in business, and it is very likely I will never recoup any of these approved expenses or salary (Yes - I have filed a claim with the California Division of Labor Standards Enforcement board and I have a hearing in April). Can I claim these amounts as a casualty loss for last year? If some or all does get recouped can I account for it on the 2007 return? If not casulaty loss is there another option to lessen my tax burden from this lost income?

Thanks!

Answer 1

You cannot claim these amounts as a casualty loss, unpaid expenses and wages don't qualify as a casualty.

The unreimbursed employee expenses are deducted on Schedule A Miscellaneous Expenses subject to a floor of 2% of your income.

The unpaid wages cannot be deducted.

If you recover money in 2007, you would include up to the amount of the wages as wages paid in 2007. If you recover more than the wages, you have a taxable recovery and may owe taxes on some or all of this amount if you received a tax benefit from the deduction in 2006.

Answer 2

The expenses that didn't get reimbursed, and the missing salary, are treated differently, since the expenses were paid out of your personal funds that you'd already paid taxes on, and the salary wasn't received and you didn't pay taxes on it.

The expenses could be deducted on schedule A as employee business expenses. You'll have to subtract 2% of your income, but will at least get something for it if you itemize. Or you might be able to claim it as a bad debt, which would be reported as a short-term capital loss.

If the salary amount was included on a W-2, then you should demand a corrected W-2 (yeah, I know, lotsa luck) or contact the IRS and ask them how to handle a W-2 that shows income you didn't receive. If it wasn't included on your W-2, then it's a wash since you never paid taxes on the money anyway, so there's nothing to deduct. Couldn't be claimed as a bad debt either, since it's not money you paid taxes on - see "basis in bad debt required" under Nonbusiness Bad Debts in chapter 14 of IRS Publication 17.

Answer 3

Your unpaid wages can't be claimed at all. However, you don't have to claim them as income either. The expenses MAY qualify as unreimbursed employee business expenses. There is no way they could qualify as a CASUALTY LOSS.

Casualty losses can result from the destruction of, or damage to your property from any sudden, unexpected, and unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption.

Answer 4

The casualty loss might in hassle-free terms prepare to the hurricane harm and not the engine area. this recommendation became arranged in accordance with our information of the tax regulation in result on the time it became written because it applies to the info which you provided. click on my profile to examine greater. Errol Quinn Enrolled Agent grasp Tax consultant

Answer 5

Take them as non-reimbursed employee expenses since that has a lower floor than casualty loss.