The most expensive mistake is claiming a personal scam loss on your federal return when the law usually does not allow it. In plain English: for most people, money lost to a scam is not deductible on a federal tax return.

Since the 2017 Tax Cuts and Jobs Act, personal theft and casualty losses are generally deductible only if they come from a federally declared disaster. A phishing scam, fake landlord scam, romance scam, or contractor fraud in Philadelphia usually does not qualify. If you claim it anyway and the IRS adjusts your return, you can end up owing back taxes, interest, and accuracy-related penalties.

There are a few narrow exceptions. If the loss is tied to a trade or business, or in some cases a qualifying investment fraud such as a Ponzi-type scheme, different rules can apply. But that is not the same thing as a regular consumer scam.

Example: a parent in Northeast Philadelphia wires $8,000 to someone pretending to be a school vendor or landlord, then reports that $8,000 as a theft loss on a federal return after reading online that "scam losses are deductible." If the IRS later reviews the return, it can disallow the deduction, send a notice for the extra tax, and add interest from the original due date. That is where people lose money twice.

If you already claimed the loss and think it was wrong, filing an amended return before the IRS catches it can reduce the damage. If the IRS problem is stuck and normal channels are going nowhere, the Taxpayer Advocate Service can sometimes help move it.

A scam can still create tax issues even without a deduction, especially if the thief used your Social Security number or if you got a bogus 1099-K or 1099-NEC tied to the fraud.