Tax Relief for Fraud Victims Act

This bill significantly amends the Internal Revenue Code to broaden tax relief for taxpayers experiencing certain losses. It repeals the limitation on deductions for personal casualty losses , meaning taxpayers can now deduct these losses regardless of whether they occurred in a federally declared disaster area. For general theft losses, the bill reaffirms that they are typically deductible in the year of discovery. A key provision introduces enhanced relief for theft losses involving fraud, deceit, or misrepresentation . Taxpayers can elect to treat these specific losses as sustained in the year they occurred, rather than the year they were discovered, offering greater flexibility. The bill also extends the period of limitation for credit or refund claims related to these fraud-induced theft losses, allowing claims up to one year after the loss is discovered and waiving certain refund amount limitations. To further assist victims of fraud, the bill creates an exception to the 10% additional tax on early distributions from qualified retirement plans for amounts related to these specific theft losses. These distributions can also be repaid within one year of discovering the loss, and their associated refund claims benefit from extended limitation periods. Notably, the bill includes a special retroactive effective date for pyrrhotite-related personal casualty losses , applying relief to losses sustained after December 31, 2020, and extending their claim period.