‘Give Me Back My Money’

A Madoff Ponzi scheme victim says he'd like the taxes he's paid for the past three years to the State of New Jersey and Uncle Sam back.

After all, he was paying capital gains taxes on money and profits which never existed.

Those of us fleeced by Bernard Madoff are looking to get some of our money back from the government, which taxed us on money we never earned. In my case, I not only lost $5 million in the Ponzi scheme, but I paid almost $75,000 to the state of New Jersey and $275,000 to Uncle Sam in taxes over the past three years on income reported by me, which, as we all know now, never existed.

We Madoff investors, creditors, survivors—please call us anything other than victims—realize we will get back pennies on the dollar from Madoff if we’re lucky, but getting back the money we paid the government and which we’re entitled to apparently won’t be easy.

Take New Jersey, for instance. On Feb. 20, the New Jersey Division of Taxation came forth with a “Ponzi Schemes and Amended Returns” notice on its website acknowledging that “many people with investments managed by Madoff are likely to have paid taxes on income that was never actually generated by them (phantom income).”

Rather than urge taxpayers to amend their tax returns to get a refund, the division does the exact opposite. “The Division of Taxation is not accepting amended returns with regard to the Bernard Madoff or other alleged Ponzi schemes,” the notice states. It goes on to advise taxpayers to claim a loss of investment that can be taken against capital gains in the year of the loss. Since almost nobody has a capital gain in 2008, the net effect of this notice is simple—Madoff robbed me of $5 million and New Jersey now wants to rob me of $75,000.

The writer goes on to say at the federal level, the Internal Revenue Service is 'eerily silent' on the entire situation.

That should be expected, since the unofficial motto of the IRS is "Be grateful we didn't take it all."