Tax Relief for Fraud Victims Act

Tax Relief for Fraud Victims Act

This bill expands the federal tax deduction for personal casualty and theft losses by eliminating certain limits, including the requirement that such losses arise from certain disasters. The bill also extends the tax refund deadline and modifies certain retirement plan rules related to certain fraud losses.

The bill repeals the limit on the federal tax deduction for personal casualty losses (not attributable to a trade, business, or transaction entered into for profit) that allows such losses only if arising from a federal or state declared disaster or to the extent that such losses offset personal casualty gains.

The bill allows taxpayers to elect to claim a tax deduction for losses arising from a theft involving fraud, deceit, or misrepresentation in the tax year such losses occur (rather than in the tax year discovered). Further, the bill extends the deadline for a refund claim related to a tax deduction for such losses to no less than one year after the date on which the losses are discovered and eliminates certain restrictions on the amount of such refund.

For early distributions from a qualified retirement plan arising from a theft loss involving fraud, deceit, or misrepresentation for which a tax deduction is allowed, the bill

• waives the 10% penalty,
• extends the deadline for filing a refund claim and eliminates certain restrictions on the amount of such refund, and
• allows one year (beginning on the day after the theft loss is discovered) to repay such early distributions.

Written by the nonpartisan Congressional Research Service. All summary versions on Congress.gov