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Congress·In Committee·about 2 months ago

Congress Proposes Tax Breaks and Penalty-Free Withdrawals for Victims of Financial Fraud

Also known as: Tax Relief for Fraud Victims Act

Legislative Progress

✓ Filed
Review
House
Senate
President

Impacts

Positive Impacts(2)
Retiree
Helps

Retirees who are fraud victims can tap retirement accounts penalty-free and get more time to repay the withdrawal.

Criminal Record
Helps

Victims of fraud and theft gain new tax deductions and extended refund deadlines, helping them recover financially.

Key Points

  • Congress is considering a bill to help people who lose money to scams or fraud get back some of that money through tax deductions. Currently, most people can only claim these types of losses if they happen during a major natural disaster. This change would allow victims of deceit or misrepresentation to deduct their losses on their tax returns.
  • The bill gives victims more flexibility on when they claim the loss. Instead of being forced to use a specific year, a person could choose to claim the loss in the year the fraud actually happened or the year they finally discovered it. This is helpful because many people do not realize they have been scammed until long after the money is gone.
  • Victims would get more time to ask the government for a tax refund related to these losses. The new rules would allow people to file for a refund up to one year after they discover the fraud, even if the normal deadline has already passed. This ensures that people who are busy with police reports or investigations do not miss out on their tax benefits.
  • If a victim needs quick cash to recover, they could take money out of their retirement accounts without paying the usual 10% early withdrawal penalty. They would also have one year to put that money back into their retirement account to protect their future savings. These changes would apply to losses and withdrawals made after December 31, 2025.
TaxesConsumer Protection

Milestones

2 milestones2 actions
Jan 9, 2026House

Referred to the House Committee on Ways and Means.

Jan 9, 2026

Introduced in House

What Happens Next

Projected impacts based on AI analysis

2026-01-01

New tax deductions and penalty-free retirement withdrawals become available for fraud victims

People who lose money to scams or fraud after December 31, 2025 can claim tax deductions and access retirement funds without the usual 10% penalty.

Related News

4 articles
Washington Post·about 1 year ago

Americans lose billions to scams, then get taxed on stolen money

Part of the 'Scammed' series, this investigative report details how the 2017 Tax Cuts and Jobs Act removed deductions for theft losses, leaving victims with massive tax bills on money they never spent. It highlights the bipartisan push to restore these deductions for fraud victims.

CL~
Washington Post·about 2 years ago

Congress saddled scam victims with taxes. A new bill would change that.

Coverage of the initial introduction of legislation to reinstate tax deductions for personal casualty losses, including theft and fraud. The bill seeks to reverse a 2017 policy that restricted such deductions to victims of federally declared natural disasters.

CL+
InsuranceNewsNet·3 months ago

Kean Joins Bipartisan Group Announcing New Health Care and Tax Framework

Details a bipartisan framework led by Rep. Tom Suozzi and supported by Max Miller that includes guardrails against fraud and extensions of tax credits. It mentions Miller's specific introduction of bills to address financial burdens on individuals.

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Source Information

Document Type

Congressional Bill

Official Title

Tax Relief for Fraud Victims Act

Bill NumberHR 6999
Congress119th Congress
ChamberHouse of Representatives
Latest ActionReferred to the House Committee on Ways and Means.

Sponsor

Cosponsors

(1)
D: 1

Analysis generated by AI. While we strive for accuracy, this should not be considered legal or professional advice. Always verify information with official government sources.