📋 Scam Victims Have to Pay Taxes on Lost Income (AARP Article)

[SpringIsHereVA]

FROM THE ARTICLE - SEE ARTICLE FOR MORE!!!

Are You a Scam Victim? You Might Get Hit Again — by Taxes.

Advocates are working to change federal laws to separate fraud losses from taxable income.

By Ken Budd, AARP. Published July 30, 2024.

Former President Trump’s signature 2017 tax law is having a ripple effect on scam victims: They’re required to pay federal taxes on the money they lost.

It’s a nightmare scenario, as Kate Kleinert knows all too well. In August 2020, the retired secretary and widow began an online romance with a man posing as a United Nations surgeon in Iraq. As he supposedly traveled to meet her in Pennsylvania, he claimed he’d been arrested and needed $20,000 for bail. Ultimately, she lost $39,000 in the scam. Then her tax accountant delivered shocking news: She owed $5,000 in federal taxes on the losses.

https://www.aarp.org/money/scams-fraud/info-2024/victims-pay-taxes-on-stolen-money.html

[GailL1]

I believe that the biggest reason why it was changed is because it got to be a BIG headache for the IRS.  People who were “scammed” didn’t have to prove that they had taken any steps in recovery - they just went from the scam directly to the deduction - 

In fact, it got to be kind of ridiculous - let’s take a simple situation as an example.  A person buys a product, they are disappointed in its performance and [they] determined they were scammed by buying this product.  They take no action to try to remedy the situation - they don’t contact the seller, they don’t try to get their money back on the product, some or all, they don’t report it to their local law enforcement.  They didn’t take out protective insurance on the product, they didn’t retain legal council to try to recoup any of the money.  

They just went from the so-called scam (or loss) directly to their income tax form as a deduction.  

To me, that isn’t right.  I am sorry that people lose money to scammers but is it up to each of us to pay MORE in taxes just because they had an unfortunate happening or did nothing to try to correct it or protect themselves from it.

Some people are just too trusting, too gullible, some are native, some just don’t seek guidance - why should other taxpayers suffer the consequences for their actions?

If they are successful by some means in recovering some of their scammed losses, should they pay taxes on these recovered monies?

What about gambling losses ?  Should we all be able to deduct our gambling  losses be that on some sports event, or horse/dog racing or even scratch offs and playing lottery games?  

I guess we all have different ways at looking at things perhaps based on our own situation.  This one is to me, really out in left field. Where is the logic?