Tuesday, March 17, 2009

I.R.S. Plans a Deduction for Madoff Victims

The Internal Revenue Service will allow victims of Bernard L. Madoff’s investment fraud to claim a tax deduction related to the bulk of their losses, the I.R.S. commissioner told the Senate Finance Committee on Tuesday.

The commissioner, Douglas H. Shulman, told lawmakers that the agency was offering guidelines for taxpayers who are victims of losses from Ponzi schemes like Mr. Madoff’s.
For those not familiar yet, a "Ponzi" scheme is a type of scam where a hustler takes money from investors and returns money at rates at a much higher return than what would normally be earned. The way to do this is to keep drawing investors in with the promise of huge returns and paying off initial investors' dividends and withdrawals with newly invested money. As long as the operator can count on more money invested than withdrawn, the fraud can go on in perpetuity. However, when a large number of people make withdrawals and/or he runs out of investors, there is a catastrophic amount of debt and the scheme is exposed for the fraud that it is. Bernie Madoff will spend the rest of his life behind bars, with good reason, for this crime.

You see, I too have been a victim of a "Ponzi" scheme. I have been paying into this mess my entire adult life. This ridiculous scam has cost me thousands of dollars over the past 16 years. I pay money in and they tell me that I can expect a return in the future, even though I know my money goes to direct payments to others. And soon, I know the "fund" is going to be insolvent just like Madoff's and there will be no one to bail me out.

It's called Social Security.

I've been hosed by a Ponzi scheme too, damnit. I want my money back.

This year, I'm writing off FICA.

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