Questionable Transactions, What Could It Be and Are They Deductible?

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What happens when your prized employee turns out not to be the person you thought they were? During the course of the year, especially when going thru your books in preparation for upcoming tax filings, you may discover questionable transactions. For example, after thorough investigation, you find that an employee had sticky fingers and was embezzling funds for several years. Is the loss deductible? When? How is the embezzlement reported to the perpetrator?

Embezzled funds are considered a theft loss, and are deducted in the year discovered, or year in which a reasonable person would have discovered the loss, if earlier. …read more

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