Fraud Victims Face Tax Blow — New Bill Aims to Ease Burden
By John Nada·Jul 18, 2026·2 min read
Fraud victims face double financial hits: scams and taxes. New bill seeks to change tax laws, offering potential relief.
Scam victims are hit twice — first by fraudsters, then by the IRS. Due to the Tax Cuts and Jobs Act of 2017, many who fall prey to scams find themselves paying taxes on money they’ve already lost, reports CNBC Business. The act, initially temporary, is now a permanent fixture courtesy of President Donald Trump’s legislation, leaving victims with few options to claim deductions, except for investment fraud cases.
However, a new bipartisan bill, the Tax Relief for Fraud Victims Act, seeks to change this by allowing more leniencies in deductible claims. The bill has already passed the House Ways and Means Committee with unanimous support. This move aims to scrap restrictions on claiming theft losses and waive early withdrawal penalties on retirement accounts, providing much-needed relief to scam victims. Matthew Roberts, a tax attorney, calls the current situation "very punitive." Indeed, the bill's approval reflects a recognition of the harsh realities faced by victims.
Reported fraud is skyrocketing — up nearly 430% since 2020, according to the FTC. In 2025 alone, $15.9 billion in scam losses were reported, marking the highest on record. Imposter scams top the list, yet, ironically, investment scams account for the most substantial financial blows, totaling $7.9 billion last year.
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Let's consider the flip side. Critics might argue the potential for abuse if deductions are broadened without strict oversight. But the sheer volume of financial devastation can't be ignored, especially among those aged 60 and older, who reported $1.6 billion in losses of $100,000 or more in 2024. "Retirement accounts are being cashed out," says AARP's Clark Flynt-Barr, highlighting the vulnerability of older adults.
The bill proposes critical changes: restoring deductions, waiving penalties, and allowing deductions in the year losses occur. These changes could significantly alleviate the tax burdens on victims. The current law requires victims to apply deductions in the year fraud is discovered, not when incurred, a process Matthew Roberts describes as particularly taxing for retirees.
Fraud victims deserve better than to be penalized by the tax system for their misfortune. The bill’s progress signals a necessary shift, one that addresses the financial duress of ordinary citizens. With the stakes so high, the need for change is undeniable. Whether Congress will act swiftly to enact these protections remains an open question.