Scammed? New IRS Guidance May Offer Relief for Construction Professionals
04/30/2025In today’s digital world, financial scams are more than just phishing emails and robocalls, they’re sophisticated, strategic, and increasingly aimed at hardworking business owners and individuals managing their personal and retirement savings. If you or someone you care about has been tricked into transferring funds under false pretenses, there may be a way to soften the financial blow.
The IRS has released updated guidance that could allow victims of certain scams to claim a tax deduction for their loss under the right conditions.
Why This Matters for Business Owners
While scams are often seen as a personal issue, many of today’s schemes target those managing sizable accounts or retirement savings, making contractors, property developers, and business owners prime targets. It’s not always about carelessness; many victims were trying to do the right thing by protecting their savings, avoiding fraud, or investing wisely.The good news: if your financial loss involved an effort to protect or grow your money, there’s a chance you could recover some of that loss on your tax return.
What the IRS Now Allows
The IRS has clarified that not all theft losses are off-limits for deduction. While most personal losses were made non-deductible under the 2017 tax overhaul, an exception still exists for losses tied to a “profit motive.” In plain terms: if you were attempting to secure or grow your financial resources and were scammed in the process, you may qualify for tax relief.Here’s What Might Qualify:
- You moved retirement funds into what you believed was a secure, interest-earning account.
- You acted on professional-sounding investment advice and wired money expecting a return.
- You responded to a convincing fraud alert, thinking your assets were at risk and took action to protect them.
What Usually Doesn’t Qualify:
Unfortunately, scams that are entirely personal in nature, such as fake romantic relationships, fraudulent charity pleas, or medical emergency hoaxes, don’t meet the IRS’s threshold for deductibility. The difference lies in the presence (or absence) of a financial gain motive.How to Claim the Deduction
If you believe you qualify, keep these steps in mind:- Act promptly: you must claim the loss in the year you discover it, not necessarily the year it happened.
- File IRS Form 4684 with your tax return to report the loss.
- Gather proof: emails, bank records, and dates of communication can help support your case.
- Keep expectations realistic: this deduction may not cover all your losses, but it could reduce your tax bill or increase your refund.