Proof of Disaster, Theft and Other Unexpected Losses
Despite all appearances, the Internal Revenue Service (IRS) is not out to get you. In fact, there are several provisions in the tax code designed to help out folks who are victims of unexpected and expensive losses of property or cash.
For example, there are special deductions for people who are the victims of theft. For IRS purposes, that includes blackmail, burglary, embezzlement, extortion, kidnapping for ransom, larceny and robbery. To claim a loss from theft, you need to provide proof that you were the owner of the property and when it was taken from you. You don't, however, have to prove that a conviction resulted from the crime [source: Internal Revenue Service]. If you were a victim of theft, bring all related documentation to your tax preparer. Keep in mind that you must deduct any paid insurance claims from your losses.
The tax code also looks after people who are victims of natural disasters like fires, floods, earthquakes, tornadoes and hurricanes. In fact, there are special exemptions and deductions for people who live within federally declared disaster areas. To qualify for these deductions, you will need to provide your tax preparer with records of the lost property, clean-up expenses and rebuilding costs. You will also need to note any FEMA assistance or insurance reimbursements that you've already received.
Now that all of your deductions have been tallied, it's time to find out if you're getting a refund or paying even more to Uncle Sam.