Lawmakers hear about fraud amid debate over allowing losses from scams to be deducted from taxes

WASHINGTON — For years, victims of scams used to be able to deduct their losses from their taxable income so that they weren’t taxed on money they lost to scammers.

But in 2017, Congress passed new tax laws that got rid of that provision, leaving scam victims to pay taxes on money they lost to fraud.

Lawmakers heard testimony about the impacts of fraud and discussed if they should reinstate the tax provision for scam victims on Thursday.

Channel 2 Washington Correspondent Samantha Manning heard from victims of scams about what they lost, and what the impact to them has been.

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Susan Whittaker says her late husband Bill was 75 and had Alzheimer’s and dementia when he fell victim to a scammer. A criminal pretended to be with a bookkeeping company working for his son’s business.

“In the end, the scammer took a total of $28,000 from us,” Whittaker told Congress. “However, the bank along with law enforcement recovered $8,000 of the money.”

That means the Whittakers were out $20,000, a devastating blow that affected them financially and emotionally.

“He sort of stopped living if I can say it that way, he was so ashamed,” Whittaker said about her husband.

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She shared her story with a Senate Committee looking into ways to fight back against scammers.

“They impersonate others, fabricate stories, make false promises,” Indiana Republican Sen. Mike Braun said.

A tax provision previously on the books used to allow victims to not pay taxes on money lost to fraud, but it was temporarily repealed under the Republican-backed tax law in 2017, the Tax Cuts and Jobs Act.

Democratic Pennsylvania Sen. Bob Casey says he wants to bring the provision back.

“It just doesn’t make any sense to have people victimized a second time when they have to pay taxes on the money that was stolen from them,” Casey told Channel 2 Action News.

Republicans said the provision was removed to lower tax rates for everyone, arguing the 2017 tax law signed by then-President Donald Trump helped more Americans save overall.

Casey says he’s hoping lawmakers will agree to bring it back to help victims of crime.

“This ought to be one that both parties should shake hands on and agree,” Casey said. “We’ve begun conversations,” he added about discussions to add the provision back with his Republican colleagues.

The repeal of the provision is set to expire next year, which means that while Congress debates tax policy, lawmakers will decide whether to restore the provision or keep it off the books again.

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