All About the Legislation That Provides Tax Relief to Victims of Scams and Disasters

All About the Legislation That Provides Tax Relief to Victims of Scams and Disasters
Cover Image Source: Court | Pexels | Photo by Towfiqu barbhuiya

Falling victim to scams is not just a financial setback for an individual, but it also takes a psychological toll, leaving a person anxious about online transactions as well as other dealings. In order to provide a semblance of relief or victims of fraudulent schemes, U.S. Senators Tammy Baldwin of Wisconsin and Peter Welch of Vermont have introduced the Tax Relief for Victims of Crimes, Scams, and Disasters Act. This legislation seeks to reinstate the tax deduction for personal casualty and theft losses, a benefit that was eliminated by the 2017 GOP tax law.

Image Source: Unsplash|Photo by Ryan Snaadt
Image Source: Unsplash | Photo by Ryan Snaadt

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Relief from this deduction has had significant consequences for victims of various unfortunate events, including scams, robberies, storms, and fires, who are now required to pay taxes on assets that were stolen from them, further exacerbating their financial hardships.

Senator Baldwin emphasized the importance of protecting Wisconsinites who have been defrauded or had their property stolen. "Our tax code should be making sure big corporations and the wealthy are paying their fair share, not punishing Wisconsinites who already have been ripped off by a scam or theft," he said.

"I’ve heard stories from Wisconsinites who have been victims of financial fraud, lost their hard-earned retirement savings, and then are slapped with an unexpected tax bill. I voted against the 2017 tax bill that created this nightmare, and now, I’m working to right this wrong to provide much-needed relief to those who are already facing dire circumstances," he added.

Unsplash | Photo by Tingey Injury Law Firm
Image Source: Unsplash | Photo by Tingey Injury Law Firm

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Senator Welch echoed these sentiments, condemning the elimination of the tax benefit for scam victims while providing tax breaks to the ultra-wealthy and corporations.

"It’s outrageous that folks scammed out of their life’s savings are hit with large tax bills. It’s even more outrageous that Republicans decided to get rid of this crucial tax benefit for scam victims, just to turn around and give the ultra-wealthy and big corporations more tax breaks," he remarked.

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Pexels | Photo by Mikhail Nilov
Image Source: Pexels | Photo by Mikhail Nilov

 

The legislation proposed by Senators Baldwin and Welch seeks to rectify the harmful impacts of the 2017 GOP tax law by reinstating the casualty and theft loss deduction. This deduction, previously available to victims of scams, thefts, accidents, and other property-casualty losses, was repealed by the Tax Cuts and Jobs Act.

As a result, Americans have found themselves facing unexpected tax bills after experiencing financial losses through fraudulent schemes or other unfortunate events. For instance, one Wisconsin woman reported being scammed out of her entire life savings, investments, and 401(k) amounting to over $200,000, and is now obligated to pay more than $15,000 in taxes.

Image Source: Krisanapong/ Getty Images
Image Source: Photo by Krisanapong | Getty Images

 

But the Tax Relief for Victims of Crimes, Scams, and Disasters Act aims to address this issue by reinstating the deduction for personal casualty loss and providing retroactive coverage to taxpayers who have suffered losses in the years following the enactment of the 2017 law.

Additionally, the legislation ensures that victims who have suffered losses subsequent to the implementation of the 2017 law are able to file amended tax returns to account for personal casualty losses.

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