Reports have emerged showing that fraud victims are facing significant tax bills following the repeal of the casualty and theft losses deduction by the 2017 Trump tax law. U.S. Senator Bob Casey, Chairman of the U.S. Senate Special Committee on Aging, has taken action by sending a letter to Internal Revenue Services (IRS) Commissioner Daniel Werfel, calling on the agency to provide information about how fraud victims are being affected by the repeal of this deduction.
In the letter, Senator Casey expressed concern over the removal of the provision that allowed victims of fraud to claim a deduction on stolen funds, which had been in place for a century. He highlighted the financial burden faced by older adults and their families, who have been left with large federal tax bills after having their life savings drained by thieves and fraudsters. Senator Casey emphasized the disproportionate impact on older adults, who were more likely to utilize the theft deduction before its elimination.
Senator Casey has been a leader in efforts to protect older Americans from frauds and scams. As Chairman of the Aging Committee, he releases an annual Fraud Book to help alert older Americans to common scams. He recently held a hearing on how scammers are using artificial intelligence and called on the Federal Trade Commission to step up its efforts to track AI scams.
The repeal of the casualty and theft losses deduction in the 2017 tax law has had a significant impact on fraud victims. The deduction, which was established in 1913, allowed taxpayers suffering from theft or casualty losses to not pay taxes on the lost income. While the number of filers using the deduction had decreased over the years, an average of 116,500 filers still used it annually from 2010 to 2017, with about half of them being age 55 or older. The 2017 Tax Cuts and Jobs Act narrowed the deduction to losses from federally declared disasters, resulting in fraud victims being hit with large federal tax bills after suffering theft losses.
Several news outlets have highlighted the negative consequences of the 2017 change in the tax code. The Washington Post reported on the experiences of older adults who faced large federal tax bills after having money stolen by fraudsters. Forbes highlighted the case of a Florida couple scammed by their daughter, resulting in a $400,000 tax bill. Another instance involved a Virginia man who lost over $800,000 to an online scam, leading to a $200,000 tax bill.
Senator Casey's letter to the IRS requests information on the number of taxpayers who have contacted the IRS about this issue and whether the IRS has been documenting the effects of the change in the tax code. He also inquires about any initiatives or campaigns specifically related to fraud, theft, or scams targeting older adults and requests tax guidance for taxpayers who fall victim to financial fraud schemes.
The letter also highlights the decline in the use of the casualty and theft losses deduction following the 2017 change in the tax code. IRS data shows a sharp decrease in the number of filers claiming the deduction and the total amount claimed. Senator Casey requests additional data on the use of the deduction for tax years 2020-2022 and the reasons for the declining use of the deduction.
In conclusion, Senator Casey's investigation aims to shed light on the impact of the repeal of the casualty and theft losses deduction on fraud victims, particularly older adults. The data requested from the IRS will provide valuable insights into the financial burden faced by these victims and help inform future efforts to protect them from scams and frauds.
Click this link to access more information: https://www.aging.senate.gov/press-releases/casey-probes-impact-of-trump-tax-law-on-fraud-victims
