A retired social worker who lost $300,000 to a gold-coin scam is now facing a second financial blow she never expected: a Medicare surcharge triggered by the very savings she drained to pay the scammers. Because the Social Security Administration calculates income-related premium adjustments using tax data from two years earlier, the large withdrawal that funded the fraud registered as a spike in her modified adjusted gross income. The surcharge arrived long after the money was gone, and current tax law offers almost no way to write off the stolen funds.
How a two-year lookback turns theft victims into high earners
The mechanism behind this second hit is straightforward but punishing. SSA sets Medicare Part B and Part D premiums each year using a formula called the income-related monthly adjustment amount, or IRMAA. As explained in the agency handbook, SSA requests modified adjusted gross income data from the IRS for the tax year two years before the premium year. A retiree who liquidated $300,000 from savings or retirement accounts in 2024 to buy gold coins for scam couriers would see that withdrawal reflected on her 2024 federal return, which SSA then uses to set 2026 premiums.
The result is a time-delayed penalty. By the time the surcharge notice arrives, the victim has no assets left from the liquidation. The Centers for Medicare & Medicaid Services have published the 2026 premium tables, which show IRMAA brackets that add hundreds of dollars per month for beneficiaries whose MAGI exceeds specified thresholds. A one-time spike from liquidating retirement funds can push a person who normally earns well below those thresholds into a higher bracket for an entire premium year, even though her ongoing income has not changed.
For most retirees, standard Medicare premiums are deducted automatically from Social Security benefits. The Social Security Administration’s own premium guidance explains that higher-income beneficiaries pay additional amounts on top of the base Part B and Part D rates. When a fraud-induced withdrawal shows up as “income,” the computer systems that calculate IRMAA treat the victim exactly like a wealthy taxpayer who chose to sell investments for profit.
Tax code changes block the only obvious offset
Before 2018, a scam victim could at least claim a theft-loss deduction to reduce taxable income. That option has largely disappeared. The IRS states that beginning with tax year 2018, theft losses are generally not deductible for individuals unless they stem from a federally declared disaster. A gold-coin fraud does not qualify. IRS rules on casualty and theft losses still describe how such deductions would be computed, but for most scam victims the practical effect is that stolen money generates no tax relief at all.
This creates a compounding problem. The retiree pays income tax or capital gains tax on the withdrawal that funded the scam, receives no deduction for the theft, and then faces a Medicare surcharge calculated from the inflated income figure. Three separate financial consequences flow from a single criminal act, while the victim’s underlying financial position has actually deteriorated.
Criminal cases highlight a broader policy gap
Federal prosecutors have been pursuing the perpetrators behind these schemes. The U.S. Attorney’s Office for the Eastern District of Missouri has charged several defendants in connection with a gold-bar courier operation that targeted older adults. According to that case, victims were instructed to liquidate savings or retirement funds, purchase gold bars or coins, and hand the gold to couriers who falsely claimed to be protecting them from bank fraud. The money vanished; the tax and Medicare consequences remained.
Yet criminal prosecutions do not address the structural issue that turns those liquidations into future “high income” in the eyes of Medicare. Unless a victim recovers funds through restitution or civil litigation, the tax return continues to show a large distribution and no offsetting loss. When SSA later pulls that data from the IRS, the system applies IRMAA surcharges automatically.
Limited avenues for relief
There are narrow circumstances in which a victim can seek relief. SSA allows beneficiaries to request a new determination if they experience certain life-changing events, such as retirement, marriage, or the death of a spouse. However, being defrauded in an investment or gold-coin scam is not listed as a qualifying event. Absent a specific statutory change, caseworkers have little discretion to disregard income that has already been reported to the IRS.
Tax professionals say that careful planning can sometimes reduce the damage for victims who discover a scam before completing large withdrawals, for example by limiting distributions to amounts that keep income below IRMAA thresholds. But once the money is gone and the return is filed, options shrink dramatically. For the retired social worker who already lost her savings, the only realistic choices are to pay the higher premiums or attempt to spread the remaining costs across credit, family help, or further belt-tightening.
The intersection of fraud, tax law, and Medicare premiums leaves some of the most vulnerable retirees bearing costs that policymakers never explicitly intended. Unless Congress restores broader theft-loss deductions or creates a targeted exception for scam-related withdrawals in the IRMAA rules, older Americans who fall for sophisticated cons may continue to be treated as high earners long after their nest eggs have disappeared.
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