New legislation; scam victims would no longer be taxed on lost money
MILWAUKEE - A Wisconsin senator introduced legislation to make sure victims of scams are no longer taxed on their lost money.
Earlier this week, Contact 6 told you about Kaitlin Henze of Whitefish Bay. She lost more than $200,000 in an elaborate scam. Much of that money came from her retirement accounts.
Henze now owes the IRS more than $15,000.
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Senator Tammy Baldwin said that is like rubbing salt in a wound.
"They shouldn’t have to pay twice and be further penalized by the IRS when they indeed were the victims of fraud," Baldwin said.
Scam victim must pay tax bills on lost money: Contact 6
In 2023, a Whitefish Bay woman lost her entire savings to a complex and convincing scam. Then, she learned much of her lost money was taxable.
It used to be that scam victims could take a theft loss deduction on their tax return. But that went away with the Tax Cuts and Jobs Act of 2017.
Baldwin's legislation would reinstate the tax deduction for the victims of scams, thefts, accidents and other casualty losses.