Huge Tax Bill Looms For Americans – By Alexander Fabino (Newsweek) / Dec 19, 2023
Victims of financial scams in the U.S. are facing substantial federal tax bills due to a 2017 tax law change, sparking criticism and concern from policymakers, including Pennsylvania Senator Bob Casey, about its impact on vulnerable populations.
The 2017 Tax Cuts and Jobs Act (TCJA), championed by Trump-era congressional Republicans, eliminated a century-old provision that allowed victims of fraud to claim deductions on stolen funds. Casey, Democratic chairman of the Senate Special Committee on Aging, in a letter sent to the Internal Revenue Service (IRS) on Tuesday, said the change has inadvertently ensnared those victims, particularly older adults, in an unforeseen financial dilemma.
Casey’s letter to the IRS brought the severity of the issue to the surface, citing cases like a Florida couple defrauded of over $1 million by their daughter, leading to a $400,000 tax bill, and a Virginia man who lost $800,000 to an online scam and was saddled with a $200,000 tax liability. These incidents aren’t isolated, Casey said, adding that as “losses from frauds and scams are increasing and the types of schemes are evolving, victims of fraud deserve more avenues to recover their losses.”
The TCJA, known for its extensive modifications to the U.S. tax code, repealed the casualty and theft losses deduction through 2025, a provision dating to 1913, which allowed victims of fraud to claim deductions for stolen funds. Before its repeal, the deduction was a safety net, particularly for older adults who, data shows, have been disproportionately affected by frauds and scams. Victims of fraud are now finding themselves taxed on the very income that was deceitfully taken from them.
