2017 Republican tax law repealed tax deduction for victims of frauds and scams to pay for corporate tax breaks
New Casey report shows how the change hiked taxes on many older adults
Report includes accounts from ten victims, including three from Pennsylvania
Casey: “Congress ought to be protecting victims of fraud and scams—not adding insult to injury by forcing them to pay taxes on their stolen savings to offset fat cat tax breaks.”
Washington, D.C. - Today, U.S. Senator Bob Casey (D-PA), Chairman of the U.S. Senate Special Committee on Aging, unveiled a new report, entitled “Scammed then Taxed: How the Republican Tax Bill Hiked Taxes on Fraud Victims,” detailing the results of a months-long investigation into how the 2017 Tax Cuts and Jobs penalized scam victims. The report examines how the removal of the casualty and theft loss tax deduction—repealed by Republicans in the 2017 tax law to pay for tax cuts for the wealthiest Americans and big corporations—has devastated many American fraud victims.
For a century, the theft loss deduction allowed taxpayers who experienced theft to receive a tax deduction to offset their losses. The repeal of this provision has meant that fraud victims are now often obligated to pay taxes on money that has been stolen. Chairman Casey’s new report details how some older adults—who lose the most to frauds and scams—are now facing huge tax bills on top of losing all their assets, leading them to feel as though they have been victimized twice.
“This report is yet another example of how, in their rush to cut taxes for the Nation’s wealthiest people and largest corporations, Republicans left working families and seniors out in the cold,” said Chairman Casey (D-PA). “Congress ought to be protecting victims of fraud and scams—not adding insult to injury by forcing them to pay taxes on their stolen savings to offset fat cat tax breaks. I hope the devastation unveiled in this report helps ensure that we never make these mistakes again, and instead use the tax code to uplift working families and those in need.”
In addition to analyzing data from various federal agencies and featuring statements from various tax experts, stakeholders, and low-income tax clinics, the report includes ten stories from older adults who lost their life’s savings to scams, then were taxed on money they no longer had. For many scam victims the change in law has been devastating:
- Larry’s retirement savings were stolen, and he then found he owed hundreds of thousands of dollars in federal taxes. He said, “After over 50 years in the workforce, my retirement dreams, and any legacy to pass on to my children have been stolen. … I think almost daily about what I should have done to prevent this from happening. I will probably continue to replay this event in my mind for the rest of my life.”
- Helen lost nearly all her life’s savings to scammers and then faced a $60,000 federal tax bill. Helen’s son shared, “She lost most of her life’s savings to the criminals and suffered significant financial and emotional distress as a result. She has entered a downward health spiral, and the emotional harm will affect her for the rest of her life.”
- Robert faces tax bills on retirement funds he’ll never get to use. He said, “My life is now changed forever, and my finances are in ruins. The peace of mind one hopes for and treasures in their golden years had vanished in an instant. I now live in the moment and [am] unable to make long-term plans. I battle against thoughts of despair, constant budget worries, and lack of self-worth.”
The report also details a series of policy recommendations, including reinstating the casualty and theft loss deduction through passage of the Tax Relief for Victims of Crime, Scams, and Disasters Act.
Casey’s report follows a letter he sent to the IRS in December 2023 requesting information about how fraud victims are being affected by the repeal of the casualty and theft losses deduction.
Casey is a leader of efforts in the Senate to protect older Americans from frauds and scams. As Chairman of the Aging Committee, each year he releases a Fraud Book, which helps alert older Americans to the most common scams reported in the previous calendar year. In November, he held a hearing entitled, “Modern Scams: How Scammers Are Using Artificial Intelligence & How We Can Fight Back,” which examined how Artificial Intelligence (A.I.) can be utilized by scammers to deploy scams and convince targets of their veracity, and how A.I. technology is being deployed to enhance the next generation of fraud detection systems. Following the hearing, he called on the Federal Trade Commission to step up its efforts to track A.I. Scams.
Read the full report here.
