When the man from Brussels asked Lori Flowers to lend him $400,000 from her 401(k), she thought she was bailing out her best friend.
By the time the “pig-butchering” scam was over, Flowers had forked over $600,000, funds she would never see again.
And then came the tax bill.
American tax law used to protect victims of theft such as Flowers – until Congress gutted the provision when it passed the Tax Cuts and Jobs Act in 2017.
Still reeling from the 2022 theft, Flowers learned she owed another $225,000 in taxes and penalties on money she had withdrawn from her retirement account for the scammers. The IRS treated it as income. Flowers declared bankruptcy.
“This is my credit,” she said. “This is my livelihood.”
Now, a bill in Congress would restore legal
protections for scam victims like Flowers, lifting the burden of paying taxes on stolen funds.
The Tax Relief for Fraud Victims Act won House approval on Sept. 15. It awaits action in the Senate.
“I think it has strong bipartisan support,” said Chuck Bell, programs director for advocacy at Consumer Reports. “I think no one wants to defend this awful provision of the tax code.”
Did Congress inadvertently strip away tax protections for scam victims?
Congress stripped away the tax deduction for theft victims in 2017, then did it again in 2025, making a temporary measure permanent.
Most lawmakers apparently didn’t grasp the real-world significance of the law change until recently, when victims like Flowers came forward.
“You get scammed, and then the IRS comes after you,” said Clark Flynt-Barr, government affairs director for financial security at AARP. “You have no money, and now you’re going to owe more money.”
When Flynt-Barr explains current law to members of Congress, she said, “They’re typically pretty shocked: ‘What do you mean, we’re taxing people on money that was stolen from them?’”
The “casualty and theft loss” deduction was one of many items Congress and President Donald Trump cut from the tax code in 2017 as they introduced a higher standard deduction.
“I haven’t been able to find reasoning other than, ‘We were trying to clean up the tax code,” Flynt-Barr said.
And why did it take nearly a decade for Congress to make it right?
One reason, Flynt-Barr and others said, is that scam victims often hide their victimhood even from loved ones and closest friends, out of shame.
In 2025, Americans age 60 and over reported $7.7 billion in losses to fraud, according to AARP, citing federal data. But the true figure might be closer to $80 billion, because of under-reporting.
“A lot of these folks are rightfully embarrassed,” said U.S. Rep. Zach Nunn, an Iowa Republican who is concerned about scam victims in his state.
'I thought we were really getting to know each other'
Flowers, 58, became ensnared when someone contacted her on LinkedIn, claiming to be a man from Brussels who was moving to her region of North Carolina.
They corresponded on LinkedIn and then moved over to email. After a month, they spoke by phone. The man’s accent sounded vaguely Belgian.
“I thought we were really getting to know each other,” Flowers said. “What I think I know now is, he was using AI.”
Flowers trusted her new friend, in part, because he wasn’t asking for anything – yet. Four months into the friendship, the man told Flowers he had won a big business contract in the United States.
“He sent me a photo of him and a man clinking wine glasses,” she said. She looked up the company on Google. Everything seemed to check out.
Then came the ask. The man told Flowers investors were dropping out. He had to raise capital.
“You’re asking the wrong person,” she told him. “I don’t have money like that.”
But eventually, she agreed to raid her retirement savings.
“It was as if my best friend had asked me,” she said.
When Flowers wired the $400,000 from her bank, the manager asked her one question: Did she know this person?
“I was offended by the question,” she said. “Of course, I know this person.”
A month later, the man told Flowers he was still $200,000 short. She took out two personal loans to cover the sum.
By June, Flowers owed the first payments on those loans, totaling $4,000 a month. Around that time, she realized she had been scammed. She told no one.
“I was honestly frozen. I couldn’t believe it,” she said.
Flowers eventually filed for Chapter 13 bankruptcy. She began making new payments, mostly to cover the tax debt. Her new monthly payment: $5,690.
If the Tax Relief for Fraud Victims Act becomes law, the tax debt might go away. Then, Flowers would only be out the $600,000 she sent to the scammers.
Second bill would help local law enforcement investigate scams
The tax-law bill is one of at least two pieces of legislation in Congress that would help victims of financial scams.
Another bill aims to give state and local law enforcement more tools to investigate financial fraud targeting older Americans.
It’s called the Guarding Unprotected Aging Retirees from Deception Act, or GUARD Act. (Not to be confused with an unrelated GUARD Act to protect children from AI.)
Nunn, the Iowa representative, sponsored the GUARD Act in the House.
He cites the case of an Iowa farmer who became ensnared in another international pig-butchering scam, this one involving a purported Russian model (actually a pair of Chinese nationals) who, according to police, took the farmer for $1 million.
(The "pig-butchering" term alludes to the idea that scammers gradually win a victim's trust, something akin to fattening a pig for slaughter.)
When the thieves found out the farmer had more cash in his house, “they literally hired three mercenaries out of New York City,” Nunn said. They drove to Iowa with firearms and attempted to seize it. The farmer “was smart enough to lock himself in the barn,” Nunn said.
Local and state law enforcement try to prosecute international scams, but they “are often overwhelmed by the sheer volume of cases and hamstrung by a lack of specialized tools and trainings,” said Bill Sweeney, senior vice president for governmental affairs at AARP.
The GUARD Act would steer federal funds to local law enforcers to hire and train staff and secure the technological tools to fight global scams.
The measure has cleared the House and awaits action in the Senate.
“We want to empower our local guys to be our first responders,” Nunn said.
This article originally appeared on USA TODAY: She lost $600,000 in a pig-butchering scam. Then came the tax bill
