Scams

What Madoff Victims Can Do

If you've been victimized by Bernard Madoff's alleged Ponzi scheme, it's too early to know whether you'll get any money back.

If you've been victimized by Bernard Madoff's alleged Ponzi scheme, it's too early to know whether you'll get any money back. But there are some steps you should take now. For starters, you'll probably want to hire a securities lawyer. Then, get your records in order. If you haven't already, you or your lawyer should contact the Securities Investor Protection Corp., which recovers funds for investors in instances of brokerage failure. The SIPC can return a maximum of $500,000. To qualify for SIPC money, you must have been a customer of Madoff's brokerage firm, Bernard L. Madoff Investment Securities. The deadline for filing a claim is July 2.

If you were a customer of Madoff's investment arm, where the alleged fraud supposedly occurred, you have no recourse with the SIPC unless your money was held at Madoff's brokerage firm. However, if you invested in a "feeder fund" that directed money to Madoff's money-management arm, you might be able to sue the fund. "Feeder funds were responsible for getting under the hood of the Madoff funds," says Jacob Zamansky, a New York City securities lawyer.

You may be able to save on your taxes by claiming a theft loss on your 2008 return. You must claim a loss in the year it was discovered, so you have to do it now. If it turns out you have suffered a total loss, your claim stands. But if you later get some of your money back, you'll need to amend your claim in a future tax year.

To take the deduction, your loss must be greater than 10% of your adjusted gross income. First, add up your losses and subtract $100, says Thomas Ochsenschlager, vice-president of taxation at the American Institute of Certified Public Accountants. Then, subtract 10% of your adjusted gross income for the year from that figure.

You can write off any excess loss as an itemized deduction on Schedule A. Use Form 4684 for your calculations. File the form with your tax return.

How to Spot the Next Bernie Madoff

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
11 Best Healthcare Stocks for the Rest of 2021
healthcare stocks

11 Best Healthcare Stocks for the Rest of 2021

The 2020s could be the decade of healthcare stocks. Here are 10 companies and one ETF to watch not just for the remainder of this year, but well beyon…
July 13, 2021
Warning: You May Have to Pay Back Your Monthly Child Tax Credit Payments
Tax Breaks

Warning: You May Have to Pay Back Your Monthly Child Tax Credit Payments

Unlike stimulus checks, you might have to repay your monthly child tax credit payments if you get too much money from the IRS.
July 16, 2021

Recommended

Bankruptcy Filings Chalked Up to COVID-19
investing

Bankruptcy Filings Chalked Up to COVID-19

Bankruptcy filings triggered by COVID-19 difficulties continue to pile up. Here, we look at 32 big-name companies that sought out bankruptcy protectio…
July 27, 2021
Shield Your Portfolio From Inflation
Becoming an Investor

Shield Your Portfolio From Inflation

Use our picks to hedge against rising prices that can eat into your investment returns.
July 27, 2021
The Psychology Behind Your Worst Investment Decisions
investing

The Psychology Behind Your Worst Investment Decisions

We can torpedo our portfolios without even realizing it. Avoiding these seven traps will allow you to make rational investments.
July 22, 2021
A Responsible Way for Teenagers to Get into Investing? Maybe.
investing

A Responsible Way for Teenagers to Get into Investing? Maybe.

Fidelity has a discount brokerage platform just for kids called a Youth Account. It has some protections baked in, along with some opportunity to lear…
July 22, 2021