A woman approached me after losing a substantial amount of money in a romance scam. She sought companionship, connection, and a meaningful relationship. A scammer targeted her on an online dating platform, gradually gained her trust, manipulated her emotions, and persuaded her to send money. She withdrew funds from retirement accounts and savings. By the time she discovered the relationship was fraudulent, her money had vanished.
Law enforcement took her case seriously, launching an investigation that traced the scam to an overseas criminal network. Despite thorough efforts, no arrests were made. Her lost money was never recovered. To add to her distress, she faced significant tax consequences from withdrawing funds to pay the scammer.
In 2025, the IRS issued guidance stating victims of certain scams may claim theft-loss deductions. Victims of investment-related scams, including ‘pig butchering’ scams, are eligible since their transactions aimed for profit. However, these deductions do not apply to victims of romance scams, as they were driven by a desire for connection, not profit.
Our tax system makes distinctions based on victims’ motivations rather than the nature of the fraud. Two victims can lose identical sums to the same criminal entity yet receive different tax treatments, depending on whether they were promised wealth or love. As technology reshapes fraud tactics, this distinction becomes less justifiable.
Modern romance scams are sophisticated financial crimes. Criminals spend months cultivating trust and crafting false identities to manipulate victims into transferring money. Today’s scammers are no longer confined to suspicious emails and implausible stories. They utilize stolen images, social media profiles, video calls, and sophisticated AI tools to construct believable identities.
A recent report from Gallup and Stop Scams Alliance revealed that 12% of successful scams in the past year involved AI or deepfake technology. AI makes deception easier and more scalable. Criminals use generative AI to craft convincing messages, communicate with multiple victims, and create believable personas. Emerging deepfake technology threatens to enable realistic video and audio impersonations.
Congress should address AI-enabled fraud and reconsider tax policies that differentiate victims based on their manipulation. In 2024, the FBI recorded 17,910 romance scam reports, with losses exceeding $672 million. Behind these figures are victims depleting retirement accounts, liquidating investments, borrowing against homes, and incurring burdensome debt.
Yet, the legal and tax systems often treat these victims as if they exercised poor judgment rather than fell prey to complex financial crimes. As an attorney advocating for survivors of coercive control, I recognize this victim-blaming pattern. Romance scams are cyber-enabled financial crimes and should be regarded as such.
This recognition should drive two changes. First, Congress should reinstate broad theft-loss deductions for scam victims, irrespective of the fraud’s nature. Second, victims who withdraw retirement funds in documented scams should not face tax penalties typically associated with voluntary early withdrawals.
My client emptied her retirement savings under criminal manipulation. She should not encounter added tax penalties for being a victim. Fraud is fraud. Tax codes should evaluate fraud based on criminal actions, not the reasons victims trusted them.
Lindsay Lieberman is a Washington-based attorney representing victims of domestic violence and technology-driven crimes. Copyright 2026 Nexstar Media Inc. All rights reserved.