Kane In Your Corner: NJ couple faces massive IRS bill after $1M identity theft scam
A New Jersey woman was lured into an elaborate scheme that led to the loss of her retirement savings. To add insult to injury, she and her husband are being taxed on the stolen money.
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A couple from New Jersey say they lost their life savings to scammers - and was then told by the Internal Revenue Service they owed hundreds of thousands of dollars in taxes on the stolen money.
Because of changes to the tax code that were passed in 2017, they're not alone.
Scammers first contacted Madhu Anat by sending her fake documents, including bogus court transcripts, purportedly showing that she was the victim of identity theft.
“I feel terrible,” says Madhu. “In terms of having lost everything that I had earned and saved for my old age."
The scammers told her every account needed to be verified with the treasury. They said the only way to do that was for her to transfer the funds.
Madhu was cautious at first but researched the names in the documents, which checked out to be real FBI agents.
She was convinced and transferred her entire retirement account – worth over $1 million.
All the money is now gone.
“You’d think I’d have suspected something, but at that point, I really didn’t.” Madhu says.
She says she was recovering from back surgery at the time, and was “in heavy sedation for the pain, and my mind was not there.”
“It was quite unnerving,” says Mark Urso, Madhu’s husband. “And definitely gave us pause to realize, OK, what are we going to do now? You know, how are we gonna survive?”
To their surprise, losing everything was just the beginning for Madhu and Mark.
Because she’d cashed in the retirement account, she now owed income tax on the proceeds – hundreds of thousands of dollars more.
The couple says they shouldn’t be punished for being victims of a crime.
“We never would have handed the money over to anybody else if we didn’t believe that the federal government was requiring us to do this,” says Mark.
In the past, the law would have prevented scam victims like Mark and Madhu from being taxed on income that was stolen from them.
But in 2017, that all changed when Congress passed the Trump tax cut.
Included in that bill is a clause that says losses due to theft are no longer deductible.
“That’s just victimizing the person all over again.” says Beverly Brown Ruggia, of Citizen Action.
She says the government shouldn’t penalize tax payers in cases like this.
“The money’s lost, and the person has not gained anything,” says Brown Ruggia. “It’s gone into the ether, basically. And there’s no reason for the federal government to tax people on that kind of disappearing money.”
Madhu and Mark are trying to negotiate with the IRS. At the very least, they’d like to pay less than the full amount owed.
“I could go back to work, but I’m 71,” says Madhu. “I don’t know if somebody will give me a job.”
As it is, the couple says they’ll probably have to sell their home to pay the bill.
Mark is hoping for some relief.
“It might be that we never end up paying this off before our time is done on this earth," he says.
