Recognizing Romance Scams as Financial Crimes

A woman approached me after losing hundreds of thousands to a romance scam. Like many in her situation, she was searching for companionship and meaningful connections. A scammer found her on a dating site, gained her trust, manipulated her emotions, and convinced her to send money. She withdrew funds from retirement accounts and other savings. By the time she realized the deception, her money was gone.

Law enforcement took the case seriously. The investigation escalated to state authorities and linked the scam to an overseas criminal network. Despite thorough efforts, no arrests were made, and her money was unrecoverable. Then came another blow—significant tax consequences from the withdrawals she made to pay the scammer.

In 2025, the IRS issued guidance on theft-loss deductions for scam victims. Victims of investment scams, such as “pig butchering,” might qualify if their transactions aimed for profit. However, these deductions do not apply to romance scam victims since their motivations were not profit-driven. Our tax system seems more lenient when victims seek financial gain than when they seek human connection. The tax code distinguishes victims by their motivations instead of how they were defrauded.

Two victims can lose the same amount to the same criminal enterprise but receive different tax treatments based on whether they were promised wealth or love. This distinction becomes harder to justify as technology changes the fraud landscape. Modern romance scams are sophisticated financial crimes. Criminals spend months building trust, creating false identities, and manipulating victims into sending money. They should be recognized as such in our tax laws.

Today’s romance scammers are not bound by errors and implausible tales. They use stolen photos, social media, video calls, and advanced AI tools to create convincing identities. A report by Gallup and Stop Scams Alliance noted that 12% of scams involved AI or deepfakes. AI makes deception more accessible and scalable. Scammers can use generative AI for persuasive messages, maintain chats with multiple victims, and create believable personas. Emerging deepfake technology may soon enable realistic video and audio impersonations of loved ones or professionals.

As Congress considers responses to AI-enabled fraud, it should reassess a tax code that treats scams differently based on the promises offered. In 2024, the FBI received 17,910 reports of romance scams, with losses over $672 million. These involve victims depleting retirement funds, selling investments, and taking on debt. Yet, our legal and tax systems still view these situations as personal misjudgments rather than financial crimes.

As an attorney representing domestic violence and coercion survivors, the victim-blaming is familiar. Romance scams must be recognized as cyber-enabled financial crimes. This recognition should lead to changes:

• Congress should allow broader theft-loss deductions for fraud victims, regardless of the scam type.
• Victims who withdraw retirement funds due to scams shouldn’t face penalties meant for voluntary withdrawals.

My client emptied her retirement savings because criminals manipulated her. She should not be penalized further for being their target. Fraud is fraud. Tax codes should judge actions by criminal behaviors, not victim motivations.

Lindsay Lieberman is a Washington-based attorney for victims of domestic violence and technology-facilitated crimes.

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