Woman Lost $600K to a Scammer, Then Got an IRS Tax Bill

When Lori Flowers first started talking to a man she met online, she thought she was making a new friend. She never imagined the relationship would eventually cost her $600,000 — or that after losing the money to scammers, she'd get another financial shock from the IRS.

It Started on Linkedin

The man said he was from Brussels and was moving to Flowers' area of North Carolina. They exchanged messages before moving to email, and about a month later, they began talking on the phone. His accent sounded vaguely Belgian, Flowers said. Nothing about the relationship immediately seemed suspicious.

“I thought we were really getting to know each other,” she said. Looking back, Flowers believes artificial intelligence may have been used to help create the person she thought she knew.

For months, he didn't ask her for money. That was part of what made the relationship feel real. Then, about four months into their friendship, the man told Flowers he had landed a major business contract in the United States. He sent her a photograph of himself with another man, apparently celebrating over glasses of wine.

She searched for the company online. Everything appeared to check out.

Then Came the Request

The man's investors were backing out, he said. He needed more money to keep the business going. Flowers initially refused.

“You're asking the wrong person,” she told him. “I don't have money like that.”

Eventually, she agreed to take $400,000 from her retirement savings. In her mind, she wasn't helping some stranger from the internet.

“It was as if my best friend had asked me,” she said.

When she went to wire the money, her bank manager asked a simple question: Did she actually know the person? Flowers was offended.

“Of course, I know this person,” she recalled thinking.

A month later, the man returned with another problem. He said he was still $200,000 short. Flowers took out two personal loans to cover it. By June, she was facing about $4,000 a month in loan payments. Around that time, she finally realized what had happened.

She had been scammed. The money was gone. “I was honestly frozen. I couldn't believe it,” she said.

She didn't tell anyone. Eventually, Flowers filed for Chapter 13 bankruptcy. But the financial damage didn't stop with the $600,000 she had handed over. It got worse.

The Money Was Stolen. The IRS Still Wanted Its Share.

Flowers had withdrawn money from her retirement account to send to the scammers. Under current tax rules, that withdrawal was treated as income. That left her facing roughly $225,000 in taxes and penalties.

So Flowers had lost hundreds of thousands of dollars to criminals — and still owed the government money because of the transaction. Her bankruptcy payment eventually reached $5,690 a month, with much of that going toward the tax debt.

“This is my credit,” she said. “This is my livelihood.”

The problem traces back to changes Congress made to the tax code. Before the 2017 Tax Cuts and Jobs Act, taxpayers could generally claim a deduction for certain personal casualty and theft losses. The 2017 law sharply limited that deduction, and later legislation made those restrictions permanent.

Now lawmakers are trying to change the rules. The Tax Relief for Fraud Victims Act would restore tax relief for certain victims of fraud and theft. The House passed the bill Sept. 15, and it awaits action in the Senate.

Consumer advocates say the current system leaves scam victims in an especially brutal position: They lose their money and can then face a tax bill on money they no longer have.

Why Did It Take So Long?

One reason may be that many victims never report what happened. Scam victims can be embarrassed, ashamed or afraid that family members will blame them. That makes it difficult to know just how much money Americans are actually losing.

People age 60 and older reported $7.7 billion in fraud losses during 2025, according to AARP, which cited federal data. The actual losses are believed to be substantially higher because so many cases go unreported.

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