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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Are you responsible for paying taxes on embezzled money even

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Are you responsible for paying taxes on embezzled money even if it is paid back in full through the courts


Hi and welcome to Just Answer!


Can you clarify if the money was embezzled and repaid in the same year?


money taken 2008-2010 paid back in 2010


Since the embezzlement is treated as income, the entity that was a subject of embezzlement should report it to the IRS. Thus - you need to report the income in 2008, 2009, 2010 correspondingly. You should have separate form 1099-misc for 2008, 2009, 2010.

The fact of repayment does not affect the reporting requirement.

You may deduct the amount repaid in 2010 on the schedule A as a miscellaneous itemized deduction subject to the 2% adjusted gross income floor limit.

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