By Chris Pugh
cleveland.com
(TNS)
A North Carolina woman who lost hundreds of thousands of dollars in an online scam is now watching Congress debate a bill that could erase a large tax debt tied to her losses.
Lori Flowers said she believed she was helping a friend she met online. Over several months, she developed a relationship with a man who claimed he was from Belgium and moving to her area, USA TODAY reported.
Eventually, he convinced her to withdraw money from her retirement account and send it to him. Flowers later discovered she had been the victim of a so-called pig-butchering scam, a fraud scheme in which criminals spend months building trust before asking for money.
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By the time the scam ended, Flowers had lost about $600,000. But another surprise followed. Because she withdrew money from her retirement account, the IRS treated the funds as taxable income.
Flowers said she was left owing about $225,000 in taxes and penalties on money she no longer had. She later filed for bankruptcy protection.
Consumer advocates say the problem traces back to changes made in federal tax law in 2017 that removed a theft-loss deduction many fraud victims once used.
A bipartisan bill known as the Tax Relief for Fraud Victims Act recently passed the House and now awaits action in the Senate. Supporters say it would restore protections for people who lose money to scams.
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Advocates hope the legislation will help thousands of victims who not only lost money to criminals but also faced major tax bills after the fraud was discovered.
Photo credit: BearyBoo/Pixabay
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©2026 Advance Local Media LLC. Visit cleveland.com. Distributed by Tribune Content Agency LLC.
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Tags: fraud, Income Taxes, IRS, Legislation, pig butchering scam, retirement accounts, scam, tax debt, Taxes
