Written by Marc R Barnes EA
July 30, 2010
Claiming the loss

With the current economic downturn, some experts suggest that employee theft will increase. So, what can business owners do if they become a victim?

Normally the loss will be in the form of embezzlement or result from the theft of a company’s inventory. Both situations involve an employee’s unauthorized taking of assets that belong to the company with no intent of returning them.

If your company is under-insured or not insured at all for these types of losses, there is relief available for you in the tax code. A deduction for a theft loss can be taken in the year of discovery. In other words, if an employee embezzled funds from you several years ago and you did not discover the scheme until now, you are still able to deduct the loss in the current year.

Before taking the deduction, you’ll need to prove that the loss happened and when it happened. However, if you take the time to meet these requirements, you can at least make the most out of a bad situation. Keep in mind that the loss deduction you receive is reduced by any insurance reimbursement you are entitled to receive.