My small business was robbed - can I claim this $130k inventory loss on my taxes?

I'm really sorry to hear about your store being robbed - that's absolutely devastating. From a tax perspective, you're dealing with what's called a casualty and theft loss, which is definitely something you can claim. Here's the thing though - since you're a cash basis sole proprietorship, you're right that you already deducted the cost of that inventory when you purchased it. This actually makes your situation a bit tricky. Generally speaking, you can't claim a loss deduction for inventory that was already deducted as a business expense. However, theft losses are handled differently. You'll want to file Form 4684 (Casualties and Thefts) with your tax return. Make sure to include a copy of the police report and any documentation that helps establish the value of what was stolen. You'll report this on your Schedule C as well. Given the substantial amount involved ($130k), I strongly recommend working closely with your accountant on this or even consulting with a tax professional who specializes in casualty losses. The rules get complicated, especially with business inventory on a cash basis.

After dealing with a similar situation with my jewelry store last year (though thankfully on a smaller scale), I discovered this incredible tax analysis tool called taxr.ai that really saved me headaches. I was getting conflicting advice about how to handle my inventory loss, and this tool helped clarify everything. I just uploaded my documentation to https://taxr.ai and it analyzed my specific scenario, showing exactly how to report the theft loss properly. The tool flagged that I was missing some critical documentation I needed for substantiating my loss and even showed me the right forms to file. In your case with $130k at stake, I'd definitely recommend checking it out since the analysis is super specific to your situation.

Just wanted to jump back in and say I actually tried out taxr.ai after seeing this thread. I had a somewhat similar situation (fire damage rather than theft) but also with cash basis accounting questions. I was skeptical at first, but it really did provide incredibly specific guidance - even pointed out a major mistake my accountant made about how we were calculating the loss. The analysis showed me exactly which forms to file and how to document everything properly. Turns out there's a whole procedure for establishing the value of lost inventory that I would have completely missed. Probably saved me thousands in potential audit issues down the road.

After reading this thread, I feel your pain about trying to get answers. When I had a major tax issue last year (different situation but similarly complicated), I spent WEEKS trying to get through to the IRS. Kept getting disconnected or waiting hours only to be told I needed a different department. Then I found Claimyr - literally the only service that actually got me through to an IRS agent. You just go to https://claimyr.com and they somehow get you to the front of the IRS phone queue. There's a video showing how it works at https://youtu.be/_kiP6q8DX5c if you're curious. For something as complicated as a large business theft loss, I'd definitely recommend talking directly to an IRS representative to confirm how to handle it. Getting official guidance directly from them saved me from making a huge mistake on my business taxes.

I'm honestly embarrassed to admit this, but I was the one who called this a scam earlier. I was SO wrong. After posting that comment, I kept struggling with my own tax issue (unrelated to OP's situation), and out of desperation, I tried Claimyr. Got through to the IRS in about 7 minutes when I had previously been trying for DAYS. The agent I spoke with gave me detailed information about how to handle a specific business deduction I was confused about. Can't believe I wasted so many hours on hold before discovering this. For the original poster - definitely worth using this service to speak directly with the IRS about your theft loss situation. Given the amount involved, getting the official word could be crucial.

My cousin had something similar happen to his electronics store. Since you mentioned you're on a cash basis, one thing to be aware of is that you've got a weird situation where you already expensed the inventory when you bought it (that's how cash basis works). This is actually different from accrual basis businesses where inventory isn't expensed until sold. So technically, from a tax perspective, you don't have the "basis" in that inventory anymore since you already took the deduction. Talk to your accountant about potentially filing an amended return for the year(s) you purchased that inventory, which might be a better approach than trying to claim a theft loss for items already expensed. It's counterintuitive but sometimes makes more sense.

Has anyone used the IRS Disaster Resource Center for something like this? I know robbery isn't a "disaster" in the federal declaration sense, but they have resources for calculating business losses that might be helpful. Just a thought.