IRA Scam Victims Could Lose Their Savings—and Still Owe Taxes

Recent IRS guidance and private letter rulings highlight a growing problem for IRA owners: fraud victims who are persuaded to withdraw money from their IRAs can face not only the loss of their retirement savings but also tax consequences.

While a rollover can prevent the immediate taxation of an IRA distribution, it does not eliminate future taxation. Taxes will generally be due when the funds are eventually distributed from the IRA.

FBI Reports Widespread IRA Fraud

According to warnings issued by the FBI’s Internet Crime Complaint Center, criminals use sophisticated schemes pretending to be government agencies, financial institutions, and technical support personnel, and in many cases, they offer investment opportunities. Sometimes, victims are persuaded to withdraw substantial amounts from their IRAs and deposit the money into accounts controlled by fraudsters.

For many Americans, retirement accounts represent a significant portion of their savings. Losing those savings to fraud can be devastating to their long-term financial security.

The Taxability of IRA Distributions

Generally, amounts distributed from a traditional IRA are taxable unless an exception applies. One of the exceptions is a rollover. If an IRA distribution is rolled over to an eligible employer plan or IRA within 60 days, the amount is generally not taxable.

But, when fraud is involved, victims often miss that 60-day deadline because the fraud is detected later, or they do not have the funds available to complete the rollover. The result can be a double financial hit: the loss of retirement savings and a tax bill on the distribution.

Fortunately, recent IRS guidance shows that relief may be available in some cases. For more on this, please see my article, "How to Get a Waiver of the 60-Day Deadline for Your IRA Rollover." More on this later.

The Double Financial Hit

In January 2025, the IRS Office of Chief Counsel issued guidance analyzing several common scam scenarios, including compromised-account scams, phishing scams, cryptocurrency investment scams, romance scams, and kidnapping scams. In several of the examples, taxpayers withdrew money from IRAs or other accounts and transferred the funds to accounts they thought belonged to them as part of the fraud scheme.

Why the Tax Problem Can Persist

Many fraud victims assume that if the money was stolen, the IRS will automatically disregard the IRA distribution for tax purposes. Unfortunately, that is not always the case. When an IRA owner voluntarily withdraws money and sends it to a fraudster, the distribution may still be taxable even though the funds were lost. That is one reason these scams can be so financially damaging, as victims may lose their retirement savings and still face an unexpected tax bill for the stolen amount.

In Private Letter Ruling 202623022, released on June 5, 2026, a taxpayer requested a waiver of the 60-day rollover deadline after becoming the victim of an elaborate fraud scheme and missing the deadline for rolling the amount to his IRA.

According to the ruling, the taxpayer was contacted by an individual claiming to be an employee of his financial institution. The fraudster falsely informed him that his identity had been stolen and that fraudulent loans had been obtained in his name. The fraudster gained remote access to the taxpayer’s computer and instructed him to withdraw funds from his IRA and transfer the money to an account provided by the fraudster.

To reinforce the deception, the taxpayer later received letters that appeared to come from government agencies involved in investigating identity theft. One letter stated that documents had been received regarding the alleged fraud. Another identified a supposed case manager who had been assigned to investigate the matter.

When the taxpayer was later unable to contact the individuals involved, he realized he had been deceived and filed a complaint with the appropriate authorities.

The taxpayer then explained to the IRS that he missed the 60-day rollover deadline because of the fraud and asked the IRS to waive it—which would allow him to complete the rollover.

Based on the facts presented, the IRS granted the waiver, provided the distribution otherwise qualified for rollover treatment.

A Pattern of IRS Relief

Private Letter Ruling 202623022 is not the first time the IRS has granted relief to a fraud victim who missed the 60-day rollover deadline.

• In PLR 202244029, a taxpayer was persuaded by individuals posing as computer support personnel, bank fraud specialists, and a federal officer that hackers had compromised her accounts. Following their instructions, she withdrew money from her IRA and other accounts to “protect” the assets. By the time she realized she had been scammed, the 60-day rollover deadline had passed. The IRS waived the deadline and allowed her additional time to complete her rollover.
• In PLR 202535015, taxpayers were told that a virus had spread to their financial accounts and that their funds needed to be moved to secure accounts. Following those instructions, IRA assets were transferred to cryptocurrency accounts controlled by fraudsters. After governmental agencies assisted in recovering funds, the IRS again granted a waiver of the 60-day rollover deadline.

Taken together, these rulings show that the IRS recognizes that victims of sophisticated fraud schemes may be unable to meet the 60-day rollover deadline and may grant waivers when the applicable requirements are satisfied.

Caution: In practical terms, rollover relief is often most valuable when the stolen funds are recovered or when the taxpayer has other funds available to complete the rollover. If the stolen funds cannot be recovered or replaced, a rollover may not be possible even if the IRS grants deadline relief.

The ruling in PLR 202623022 does not indicate whether the taxpayer recovered the stolen funds. That detail matters because many fraud victims face the harsh result of losing the money and still owing income tax on the distribution.

In one of the earlier rulings, the taxpayers were able to recover the transferred funds before seeking rollover relief. In the other rulings, it is unclear whether the funds were ever recovered. Without recovered funds or otherwise available funds, a taxpayer may still face taxation on the distribution even if the IRS grants a waiver.

How to Protect Your Retirement Savings From Fraud

While no prevention strategy is foolproof, many retirement-account scams share common warning signs. Being able to detect them can help to protect your IRA from fraud. Consider the following precautions:

• Be skeptical of urgent requests involving your retirement accounts.
• Verify callers using contact information from your account statements or the institution’s official website.
• Be wary of instructions to move money to a “safe,” “secure,” or “protected" account.
• Treat requests to convert retirement savings to cryptocurrency as a red flag.
• Never provide remote access to your computer or mobile device.
• Consult a trusted advisor, attorney, accountant, family member, or friend before making a large withdrawal from an IRA.
• If you suspect fraud, contact your financial institution immediately and report the matter to law enforcement and the FBI’s Internet Crime Complaint Center.

Before withdrawing a significant amount from an IRA, consult a trusted advisor, attorney, accountant—even a family member or friend. A brief conversation with someone else may reveal warning signs that are difficult to recognize when pressure is being applied.

Act Quickly If You Suspect Fraud

If you believe you have been victimized, take steps that include the following:

• Contact the financial institution immediately.
• Report the fraud to law enforcement.
• File a complaint with the FBI’s Internet Crime Complaint Center.
• Preserve emails, text messages, account records, and other evidence.

Immediate action could improve your chances of recovering assets.

What Fraud Victims Need to Know

Fraud involving retirement accounts can create more than financial losses. Depending on the facts, victims may also face income taxes on IRA distributions used in the scam. Although the IRS has shown a willingness to grant relief when fraud causes a taxpayer to miss the 60-day rollover deadline, that relief is often most valuable when the funds can be recovered.

Denise will be speaking at the 2026 WealthCounsel Symposium in Las Vegas held Sept. 23-25. Her session, “Retirement Assets in Estate Planning: Costly Mistakes That Derail Plans,” explores common retirement-asset planning errors that can undermine estate plans.