Year-End Checklist For Victims Of Pig-Butchering & Crypto Scams: How To Protect Your Tax Relief Claim

For victims of so-called “pig-butchering” and related crypto or romance scams, December 31 is a critical deadline that can determine whether the IRS recognizes your loss for tax purposes on your 2025 tax return.

The IRS has confirmed that victims may qualify for theft-loss deductions when their investments were made with a genuine intent to earn profit, as reflected in a 2025 Chief Counsel memorandum. 

That acknowledgment gives victims a new opportunity to recover part of what they lost, but only if the theft is documented properly and on time.

Why Year-End Timing Matters For Crypto Tax Relief

The IRS rules on theft-loss deductions tie each claim to the year the loss is discovered, not when the money was first sent. 

If you realized in 2025 that you were defrauded, you must have documentation dated by December 31, 2025, in order to claim the deduction on your 2025 tax return.

Failing to meet this deadline can eliminate your right to claim the loss. Even if you’re not yet ready to file your return, you still need evidence – such as police reports, IC3 submissions, evidence of reports made to financial institutions, financial records, and communication logs – showing when you discovered the theft.

These timing requirements are why tax attorneys emphasize acting before year-end. Missing the documentation window may force you into another filing year and risk losing valuable evidence.

Step-By-Step: What To Do Before December 31

Use this checklist to make sure you’ve taken the essential steps to protect your theft-loss claim.

1. File official reports. Submit a complaint to the FBI’s Internet Crime Complaint Center (IC3.gov) and your local police department. These reports establish that a theft occurred.

1. Preserve digital evidence. Save all texts, chat logs, emails, screenshots, and platform images that show how the fraud operated.

1. Collect financial records. Download bank and wire-transfer receipts, credit and debit card activity, crypto-wallet logs, and correspondence with your financial institutions or brokerage firms showing when funds left your account.

1. Document your discovery date. Note when you realized you were a victim; that determines the correct tax year for your claim.

1. Consult a qualified tax attorney. Professional guidance helps ensure that your evidence meets IRS standards and that your claim is correctly timed and filed.

How To Organize Your Evidence

The IRS won’t reconstruct your case for you. Organizing your records now will make it easier to substantiate your claim later.

Here are some tips:

• Create labeled folders for communications, financial records, law-enforcement reports, and timeline notes.
• Save PDFs with clear file names (e.g., Wire Transfer 6-12-25 – $50,000).
• Maintain a simple timeline showing when funds were sent, when the platform stopped responding, and when you discovered the fraud.
• Back up digital files in secure locations such as encrypted drives or a secure cloud.

Well-organized evidence speeds up the IRS review process and strengthens your case during communications with examiners.

How A Tax Attorney Strengthens Your Claim

As described in the IRS’s 2025 guidance, proving a theft-loss case requires correctly applying rules under IRC §165(c)(2) and supporting your claim with detailed evidence.

A tax attorney can:

• Determine whether your loss qualifies for theft-loss treatment.
• Prepare or amend tax returns so your deduction appears in the correct year.
• Communicate with IRS agents during review or examination.
• Coordinate with the Taxpayer Advocate Service (TAS) or represent you during a Collection Due Process (CDP) hearing when additional advocacy is required.

Legal support helps avoid common mistakes that can cause the IRS to deny or delay a claim.

After You File Your Theft-Loss Claim: What To Expect

Once your tax return or amended return is filed, expect a period of review.

The IRS may request additional details or open an audit to confirm your documentation. Such requests are common.

While an audit may sound intimidating, in theft-loss cases it can be beneficial. It provides an opportunity to present your evidence directly to the IRS and explain the full context behind the loss.

An experienced attorney can communicate with the IRS on your behalf and ensure your timeline and documentation are fully understood.

Seek Tax Relief Before The Deadline

Falling victim to a scam can be overwhelming, but the IRS’s updated guidance offers a path forward. 

Attorney Sammy Kim has helped tax scam victims document their losses, communicate with IRS examiners, and navigate audits and appeals when necessary.

If you discovered your loss in 2025, now is the time to act.

Contact The Law Offices of Sammy Kim to discuss your situation confidentially and preserve your right to claim relief.

Frequently Asked Questions About Year-End Theft-Loss Claims

Why is December 31 such an important deadline for tax scam victims?

The IRS ties theft-loss deductions to the year you discover the theft. To claim a 2025 deduction, supporting documents such as IC3 or police reports must be dated by December 31, 2025.

Are romance scams or kidnapping scams treated the same as pig-butchering scams for tax purposes?

No. Losses from romance or kidnapping scams are generally considered personal casualty losses under §165(c)(3), which are not deductible under §165(h)(5) unless a rare exception applies (such as personal casualty gains or Federally declared disasters). Only profit-motivated scams, such as pig-butchering schemes involving fake investments, may qualify under §165(c)(2).

What documentation does the IRS expect from victims of pig-butchering scams?

The IRS expects a clear paper trail, including police and IC3 reports, communication logs, financial transfers, crypto-wallet data, and correspondence with your financial institutions or brokerage firms. Proof that the trading platform or wallet is no longer accessible is also important.

Will filing a theft-loss deduction increase my chances of an IRS audit?

It may. The IRS often reviews theft-loss claims closely. But in many cases an audit provides a constructive opportunity to explain the fraud, organize your evidence, and validate your eligibility for relief, especially when represented by a tax attorney.

Can I amend a prior year return if the theft happened before 2025?

Yes. If the theft occurred earlier but was discovered in 2025, you may amend a prior return within the statute of limitations. A tax attorney can determine the correct year for the deduction and confirm whether your timeline meets IRS requirements.