No Penalties for Victims of Fraud Act

This bill amends the Internal Revenue Code to waive early withdrawal penalties from retirement accounts for victims of fraud. It allows individuals who are victims of fraud to take distributions from certain retirement plans without incurring the usual 10% early withdrawal penalty, provided they meet specific documentation requirements and are designated as victims of fraud by the Treasury Secretary.

Sec. 2, Waiver of early withdrawal penalties for victims of fraud: This section adds a new exception to the early withdrawal penalty rules. It defines a "victim of fraud" as someone who submits a waiver application to the Treasury Secretary with documentation from a law enforcement agency or court proving they were a victim of a fraudulent act that led to a retirement plan distribution. The Secretary must designate the individual as a victim. The distribution can be repaid under rules similar to those for other exceptions. The waiver applies to eligible retirement plans, excluding defined benefit plans. This change applies to distributions made after the bill's enactment date.

Sec. 3, Information and outreach: Within 180 days of enactment, the Treasury Secretary must issue guidance on how to claim the waiver. The Secretary must also conduct a public awareness campaign to inform the public about this new relief.