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1099 for Embezzlement?

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Anonymous
Anonymous

We have a business client that had a sizable amount embezzled during 2012.  The embezzlement was discovered in 2013, so it is deductible in 2013.  The assistant district attorney (and client) want to send a 1099 to the perpetrator, but I have read that a 1099 might not apply.  The perpetrator will not be paying any of the stolen funds back.

Has anyone dealt with this situation?  I appreciate any feedback.

Replied on
ira klein
ira klein

isn't illegal income still income; doesn't a prostitute have to report her income even though prostitution is illegal. the fact that the perpetrator will not be paying back the stolen funds seems to be all the more reason it should be recorded as income. only issue, is it definite the indiv committed the crime
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Anonymous
Anonymous

I too have a client with a similar situation. What if it cannot be determined with certainty if the individual committed the crime? In this case, there are several transactions that appear to be payment to or on behalf of the individual (who was treasurer). However, the individual claims to have lost the information or will not turn it over. What are the repercussions to my client for reporting as 1099 income and letting the indivudual prove otherwise if that's the case?

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