This DC senior was tricked into draining her life savings from her 401(k) — now she’s on the hook for $180K in taxes

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This DC senior was tricked into draining her life savings from her 401(k) — now she’s on the hook for $180K in taxes

Judith Boivin was a little distracted when she received the second call in two days from the “Rockville Police Department.” She figured it must be important.

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The 80-year-old retired therapist was taken aback to hear her Social Security number had been flagged in a crime. She was told she needed to clear things up or she’d be facing charges.

As she told. the Washington Post, Boivin was told a drug cartel had used her Social Security number to set up multiple bank accounts. She was asked if she’d be willing to be an asset for the FBI and she readily agreed to assist however she could.

Boivin believed she was working with an FBI agent named Wayne A. Jacobs — a real-life investigator — to pursue the drug cartel, but in reality, she was being fed lies and manipulated into emptying her 401(k) by scammers. Over the course of months in 2023, the scammer had her cash out over $595,000 from her retirement account.

But not only did Boivin lose her life savings to a government imposter scam — an increasingly common type of fraud — she’s now on the hook for a six-figure bill for the tax agency after cashing out her 401(k). There may be little she can do regarding the former as the fraud apparently traces to a call center based in India.

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But her tax circumstance could change if the IRS acts on her specific case or Congress restores a write-off that allows fraud victims to claim deductions that offset their losses — a protection scrapped during Donald Trump’s presidency.

In emptying her retirement account, Boivin created a tax liability of more than $137,000 to the IRS and $42,000 to the state of Maryland for the 2023 tax year. Prior to 2017, she would’ve had recourse through tax legislation that protected scam victims. But the 2017 Tax Cuts and Jobs Act brought those protections to an end.

They could be restored if Congress moves forward on two pieces of stalled legislation. The bipartisan Casualty Loss Deduction Restoration Act would reinstate personal casualty loss and theft deductions of up to $50,000 through 2025 (and allow for amended returns as far back as 2018) with no limit on deductions after 2025. The Tax Relief for Victims of Crimes, Scams, and Disasters Act, proposed by Democrat lawmakers, would work similarly. Neither bill has made it past the introductory phase in the House or Senate.

Boivin and others in her situation can also ask for tax forgiveness through the IRS Offer in Compromise (OIC) program, intended to help people experiencing economic hardship. But that’s at best a 50-50 shot. In fiscal year 2023, the IRS accepted about 12,700 of the roughly 30,000 OIC proposals taxpayers made, making for a total of 42%.

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Government impersonator scams like the one that targeted Boivin represent just one of 13 common frauds seniors are susceptible to, according to the Federal Trade Commission’s 2023-2024 report, “Protecting Older Consumers.” In that report, the FTC noted that those 60 and older reported losses of more than $1.9 billion in 2023, up from about $1.6 billion in 2022. However, the FTC added that because the vast majority of frauds go unreported, these numbers are likely only a fraction of the real cost for American seniors.

In fact, the FBI’s Internet Crime Complaint Center (IC3) reported $3.4 billion in elder fraud losses for 2023 and $1.6 billion from January to May of 2024, up nearly $300 million from that same period last year.

Here are three ways to protect yourself from government impersonators:

Ignore demands for money. Government impersonators will invoke urgency in a bid to bypass your better judgment and get you to panic. As the FTC notes, “Government agencies will never call, email, text, or message you on social media to ask for money or personal information, and they will never demand a payment. Only a scammer will do that.”

Never give your financial or personal information. Should you ever hand over your Social Security number or bank account password? Never. Still, it continues to happen to unsuspecting people who impulsively click on email or text links, or take suspicious phone calls.

Ignore your caller ID. The malefactors in Boivin’s case grabbed her attention through a fake caller ID label indicating they were from a local police department. Often, criminals mislabel their calls as coming from a law enforcement or other government agency, so don’t let your phone do the thinking for you.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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