The House Just Passed the Tax Relief for Fraud Victims Act: What It Means If a Scammer Filed in Your Name

Congress just took a significant step toward fixing a problem that has quietly punished fraud victims for years. On September 15, 2026, the U.S. House of Representatives passed H.R. 9500, the Tax Relief for Fraud Victims Act, and sent it to the Senate. If it becomes law, the bill could change the rules for how the IRS treats money that was stolen from you, including losses tied to identity theft, investment scams, Ponzi schemes, and other fraud. Here is what you need to know right now, and what you should be doing while the bill works through Congress.

What the House Just Passed

On September 15, 2026, the United States House of Representatives passed H.R. 9500, the Tax Relief for Fraud Victims Act. The bill was introduced by Representative Max Miller of Ohio alongside Representative Thomas Suozzi of New York. The vote was an overwhelming 408 to 17, a rare show of bipartisan agreement.

The bill addresses long-standing concerns about the restrictive personal casualty loss rules put in place by the Tax Cuts and Jobs Act of 2017, and institutes relief and extended refund periods for taxpayers who suffer theft losses stemming from fraud, deceit, or misrepresentation.

The bill has not become law yet. H.R. 9500 has passed the House of Representatives, but it remains a proposed bill. To become law, it must still be considered and approved by the United States Senate and subsequently signed by the President. As of the date of this article, it has been referred to the Senate Committee on Finance. Watch this space.

Why the Current Tax Law Has Failed Fraud Victims

Before you can understand what this bill changes, you need to know what the current law does, and does not, allow.

Under current law, the deduction for personal casualty and theft losses is largely suspended, unless the loss is attributable to a federally or, in some instances, state declared disaster. In other words, if a hurricane destroys your home, the tax code may help you. But if a scammer steals your savings? You are largely on your own.

As a result, many victims of private-sector fraud, like Ponzi schemes, identity theft, or investment scams, have no ability to deduct their significant financial losses. The Ways and Means Committee described this plainly: the current rules essentially tax people on money that was stolen from them.

Consumers reported $15.9 billion in fraud losses to the FTC in 2025, a 27 percent increase from the prior year, and current tax law leaves most private-sector fraud victims without meaningful deductions. That gap is exactly what H.R. 9500 is designed to close.

The Four Things This Bill Would Change

1. Theft-loss deductions would come back for fraud victims

The bill repeals the limitation on personal casualty losses in the tax code to strike the requirement that a loss must be linked to a federally or state declared disaster. If you lost money to identity theft, a romance scam, a Ponzi scheme, or a cryptocurrency fraud, you may qualify to deduct that loss, depending on your circumstances, once the bill is signed into law.

2. You would get more flexibility on when to claim the loss

Fraud is often discovered years after it happens. Under existing rules, that timing can work against you. The bill provides flexible reporting for fraud victims, allowing taxpayers to elect to treat a theft loss as sustained in the year the loss occurred, rather than just the year the loss was discovered. That is a meaningful difference if you did not find out about the fraud until long after the money was gone.

3. The deadline to file a refund claim would be extended

Right now, the IRS generally requires you to file a claim for a credit or refund within three years of filing the original return. Complex fraud cases almost always take longer to sort out than that. Under the bill, the statute of limitations for filing a refund claim based on a fraud theft loss deduction would not expire before one year after the date of discovery. This ensures that complex fraud cases do not outrun the IRS’s standard three-year window.

4. Retirement account withdrawals tied to fraud would get special treatment

A person younger than 59½ who withdraws retirement funds to pay a scammer may owe ordinary income tax on the distribution. Current rules can also impose a 10 percent additional tax for taking the money early. The bill adds a new exception under Internal Revenue Code Section 72(t)(2) to allow penalty-free retirement account distributions related to fraud-related theft losses. It also allows victims to repay these distributions into an account and seek refunds for taxes previously paid on those distributions.

If Someone Filed a Tax Return Using Your Social Security Number

Tax-related identity theft, where a scammer files a return in your name to steal your refund, is one of the specific fraud types the bill targets. But whether or not H.R. 9500 becomes law, you need to act right away if this has happened to you. The IRS process for this situation is separate from the bill, and waiting makes things worse.

Criminals file a fraudulent return before you do and collect your refund before you even open your tax software. If someone has stolen your Social Security Number and filed a fraudulent tax return to receive your refund, your tax filing will be rejected if you try to e-file. If you mail in your tax return you will likely receive a written notice from the IRS.

Here is the sequence of steps to take:

1. File Form 14039, Identity Theft Affidavit. Complete Form 14039 online or by completing the paper version, which can then be printed and mailed or faxed to the IRS. Within 30 days after the IRS receives your Form 14039, you will get a letter telling you that the IRS received your affidavit.
2. Watch for Letter 5071C or Letter 4883C. The IRS may send Letter 5071C, which asks you to use an online tool to verify your identity and tell the IRS if you filed the return in question. A variation, Letter 4883C, asks you to call the IRS to verify your identity.
3. Request a copy of the fraudulent return. A victim of identity theft may request a masked tax return transcript of the fraudulent return that was filed and accepted by the IRS using the victim’s name and SSN. If you are unable to access your IRS online account, you can mail or fax a completed Form 4506-F, Identity Theft Victim’s Request for Copy of Fraudulent Tax Return.
4. Get an Identity Protection PIN. The IRS will work to verify your identity, clear the fraudulent return from your account, and generally place a special marker on the account that will generate an IP PIN each year for confirmed victims. That PIN must be included on every future return you file, preventing anyone else from filing in your name.

Be patient, but persistent. Resolving tax identity theft with the IRS takes an average of 12 to 18 months, and victims must file paper returns, submit extensive documentation, and often wait an entire additional tax cycle.

When Would the New Rules Take Effect?

The bill is not law yet, and nothing in it applies to your 2025 or 2026 taxes until the Senate acts and the President signs it. According to the Joint Committee on Taxation description of H.R. 9500, the repeal of the casualty loss limitation, modified timing rules, and extended refund periods would apply to losses sustained in taxable years beginning after December 31, 2025. The retirement-plan exception would apply to distributions made after that date.

That means if the bill passes the Senate and is signed into law, losses you suffered in tax year 2026 and later could be covered. Talk to a qualified tax professional before amending any prior returns or changing how you plan to file.

What to Do Right Now

H.R. 9500 is a real and meaningful step. But the gap between a bill passing the House and a law actually protecting you is wide. In the meantime, the most important things you can do are to document your losses carefully, act quickly if a fraudulent return was filed in your name, and get professional guidance on where you stand.

If you are dealing with back taxes, an IRS notice, unfiled returns, or the aftermath of identity theft and fraud, Clear Start Tax works with individuals and businesses every day to sort through exactly these situations. Every case is different, and what you may qualify for depends entirely on your specific circumstances. The right starting point is a confidential consultation where someone can look at your actual situation, not a general answer from the internet.

The law may be changing in your favor. Make sure you are positioned to take advantage of it when it does.