Identity theft debt

[Unregistered]

Taxpayer had credit card taken by son-in-law. She was not aware of this. He and her daughter charged much to the card over a period of years. They had the billing address changed and were paying the bills faithfully. All of a sudden they stopped. TP received a call from someone indicating that there was a large balance due. After investigating found out the facts noted.

Tp withdrew $16,000 from her IRA. Taxable in 2005. She is older than 59 1/2. Whew !!! My question is can she write off any of the $15,450 she paid to cover the outstanding debt? How about a N-B bad debt. This is very uncollectible. @!!!

[DaveO]

Reasonable Collection Effort Must be Made

In order to deduct a bad debt there must be bonafide debt. Did she report the theft to the police or make any effort to get the money from her daughter and son in law? I would say she has made a gift.

[Jiggers]

File Charges

File charges on the deadbeats. Even kinfolk!

To be able to write off debts, especially to relatives, you do have to take legal steps.

This include filing charges with the proper legal authorities.

Tough love!

But, I would bet that the mother had an idea that something like this was going on, just doesn't want to admit it.

[jainen]

It is a personal expense

It is a personal expense with not tax effect. This could never be treated as a bad debt, since at the time the bills were incurred she did not have an enforceable contract for them to repay her on a specified schedule with interest. It might have been a theft, but again at the time the bills were incurred she did not treat it as stolen, allowing the charges to continue for years and not filing a police report.

[Bees Knees]

I don't think there is a limit as to how fast you need to know you were ripped off. I think it would depend upon whether at the time you finally find out, did it get reported to the police? That is probably moot, anyway, because of the 10% AGI limitation.

I would advise the taxpayer to file a claim in small claims court. When the pond scum doesn't show up for court, then take it as a bad debt deduction.

[jainen]

I don't buy it

I don't buy it. She let her own daughter use the card for years. Then she paid the bill instead of filing a police report and disputing fraudulent charges. How would she explain that to a judge? It just doesn't look like theft. And even with a judgment it wouldn't be a bad debt, because they never promised to pay her back. This is a family arrangement that fell through, not something that the tax system needs to subsidize.

[S T]

Did Mother Know?

Jainen,

Where do you see in the prior posts that the Mother (t/p) was paying the credit card bills, or see where she gave the credit card to the daughter and son in law with her "blessings"?

Taxpayer had credit card taken by son-in-law. She was not aware of this. He and her daughter charged much to the card over a period of years. They had the billing address changed and were paying the bills faithfully. All of a sudden they stopped. TP received a call from someone indicating that there was a large balance due. After investigating found out the facts noted.

It would seem the T/p did not use this particular card/line of credit, so didn't miss the card or expect a monthly statement. With the billing address changed, the daughter and son in law probably received cash advance checks, and other enticements. Question is why did it take the Credit Card Company so long to find out and notify the t/p.

As a credit card theft or identity theft would it not be the same as if a total stranger took the card and charged on it. The only difference being that the t/p would find out in more expedient time. It seems from the above post that the daughter and son in law were trying to hide it and continue the "ride".

A charge needs to be brought against the daughter and son in law, and also a smalls claims action. Not that anything will come of it, or monies will be recovered, but as Jiggers so well stated it "TOUGH LOVE". What a couple of losers!

Sandy

[jainen]

with her "blessings"

>>Where do you see in the prior posts that the Mother (t/p) was paying the credit card bills, or see where she gave the credit card to the daughter and son in law with her "blessings"?<<

Well, there was the "$15,450 she paid" and though I never said the kids had her blessings, if she didn't notice they were using the card for a period of years that's not ordinary care.

I wouldn't treat this as a theft because the supposed victim isn't treating it as a theft. At least as described in the original post, she didn't dispute the charges as fraudulent, she didn't file a criminal complaint, and she didn't take action to enforce recovery.

[Bees Knees]

Well, there was the "$15,450 she paid" and though I never said the kids had her blessings, if she didn't notice they were using the card for a period of years that's not ordinary care.

You are miss-understanding the original post. The kids were using the card and paying the balance due for years. They had the billing address changed to their address so Mom wouldn’t know they were using her card.

Then one day they decided to stop paying their bill and stiff Mom for the outstanding balance.

If we are to believe the facts as presented, Mom had no reason to know they were using her card.

That is actually how allot of identity theft works. Someone gets a hold of your personal info, then they take out credit cards in your name, but with the address going to their address. You have no idea someone is using your name on a credit card. They might even pay the bill for a time, establishing an even higher credit rating. Then one day, BOOM…they stiff you with tens of thousands in unpaid credit card debt.

[jainen]

Hey, come on!

>>That is actually how allot of identity theft works<<

Hey, come on! This was NOT identity theft. Her daughter and son-in-law were using her valid card, and she is responsible for its use unless she notifies the bank. Didn't she agree to that on her application? That's what I mean about ordinary care--you just can't ignore your finances for YEARS and then say, "Whoops, give me a tax break!"

Besides, you still aren't addressing the issue of why she isn't treating it as a stolen card.

[Unregistered]

theft

Hey, come on! This was NOT identity theft. Her daughter and son-in-law were using her valid card

If that isn't identity theft, then what is? (daughter and son-in-law impersonating the mother in order to use her credit card).

[Bees Knees]

That's what I mean about ordinary care--you just can't ignore your finances for YEARS and then say, "Whoops, give me a tax break!"

Besides, you still aren't addressing the issue of why she isn't treating it as a stolen card.

Why do you say she ignored her finances for years? If you don't use a credit card for years, it goes inactive. You normally do not get statements from a credit card that is no longer in use. How was she supposed to know they stole it and changed the billing address?

As to not turning the dead beats in, I think it is understandable that a parent would tend to not want to go down that route.

[jainen]

theft treatment on the tax return

Well, first of all, we now know that it was not an inactive card purloined from her by the son-in-law, but a new card issued in her husband's name by her daughter. But to continue with the original scenario...

It is normal care to attend to an unused credit card. Yes, it's probably common to lose track of some things, but that's not worthy of a tax deduction. As to turning in her daughter, of course she won't. That's why she paid the bill. She is not treating it as a theft, and therefore can't take theft treatment on the tax return.

[Bees Knees]

But to continue with the original scenario...

It is normal care to attend to an unused credit card. Yes, it's probably common to lose track of some things, but that's not worthy of a tax deduction.

OK, so lets say Mom has a file cabinet with files for each bill....electric bill, gas, water, credit cards, home mortgage, etc.

She puts each bill in its proper file. For the credit card she no longer uses, she keeps that file so that if she ever does want to start using it again, she has access to the previous bills, plus all of the other credit card information. She no longer receives monthly bills for the card, as it has gone inactive, but keeps the information in the file for future reference.

The kid sneaks in some day when she is not around, steals the info, gets the billing address changed, charges some things over the internet where they do not require the actual credit card, and eventually, the credit card company issues a new credit card to the new billing address when the old card expires.

All along, Mom has no way of knowing this is happening. Every time she looks in her file, all she sees is paperwork indicating an inactive credit card that hasn't been used in years.

How is this not normal care? Are you suggesting we start putting all of our files in a vaulted safe with armed guards to prevent theft?

[jainen]

>>Are you suggesting we start putting all of our files in a vaulted safe with armed guards<<

No, I don't like guns. I'm saying that a person with an open credit line should check on it from time to time, at least every year or two. And if a problem is discovered, she should notify the bank and take other appropriate action.

>>How is this not normal care?<<

Normal? yes. Care? no.