What is Form 4684 and what is it used for
Form 4684 is a tax form used to report Casualties and Thefts casualty is defined as damage, loss, or destruction of property from any sudden, unexpected, or unusual event, such as a car accident or a natural disaster. A theft is defined as the taking of property without the owner’s consent.
The purpose of this is to help taxpayers determine whether they are eligible for a deduction or loss on their taxes. To claim a deduction, taxpayers must first calculate their casualty or theft loss. This amount is then subtracted from the taxpayer’s adjusted basis in the property. The resulting figure is the deductible loss. Taxpayers who do not itemize their deductions can claim a standard deduction for casualty and theft losses.
When do you need to file Form 4684
This is used to figure the amount of your casualty and theft losses. You must file Form 4684 if:
- You had a loss from fire, storm, shipwreck, or other casualty, or from theft during the tax year.
- Your personal-use property was not completely destroyed, but its fair market value (FMV) at the time of the casualty was less than its FMV immediately before the casualty.
- You have gains you need to figure under the rules for optional reporting of gains from involuntarily conversions discussed later.
- The total of all your casualties and thefts during the year (after subtracting any reimbursements or other compensation you received) was more than $500 for each event.
No one stole your property. A common mistake people make is to think that only when property is stolen do they have to file the Form. This isn’t true. You must file this even if your car is totaled in an accident and no one stole it. The car doesn’t have to be stolen for you to have a theft loss; it just can’t be completely destroyed.
How to complete Form 4684
Instructions for Form 4684 can be found on the IRS website. The form must be completed and attached to your tax return. You will need to provide information about the disaster, when the loss occurred, and how the loss affected your property. You will also need to provide specific information about each casualty or theft, including a description of the property, the date of acquisition, the cost or other basis, any insurance reimbursement received, and the amount of loss. Once you have completed the form, you will need to calculate your total loss and enter it on Form 1040 or Form 1040-SR.
Tips for filing Form 4684
Here are a few tips to help you complete the form:
1. Make sure you have all the necessary information. In order to complete Form 4684, you’ll need documentation of the value of your property before and after the damages occurred. This can include appraisal reports, insurance records, or other similar documentation.
2. Fill out the form completely and accurately. Be sure to include all relevant information about the damages, including when they occurred and how much they totaled.
3. Keep good records. Be sure to keep all documentation related to your loss, as you may need to provide it to the IRS if your return is audited.
4. File it with your tax return. Once you’ve completed the form, attach it to your 1040 or 1040A and file it as instructed.
When you finish Form 4684, you’ll need to attach it to Form 1040 or Form 1040-SR. Be sure to enter the information on the appropriate lines of your tax return. If you have a gain from Form, you may be able to postpone paying taxes on the gain by reinvesting in a Qualified Opportunity Fund. For more information, see Form 8949 and its instructions.