The Internal Revenue Service is allowing tax relief and refunds for some investors who paid taxes on earnings from their investments with Bernard Madoff that turned out to be nonexistent.
IRS Commissioner Douglas Shulman is telling Congress Tuesday that the agency is issuing guidelines for taxpayers who are victims of losses from Ponzi investment schemes such as the massive Madoff swindle.
Madoff investors should have been reporting earnings from their investments with him through the years and thus paid taxes on those earnings.
Given that some of those were "phantom" profits, investors have said they should be entitled to refunds of the taxes they paid.
Video: CNBC's Scott Cohn on the IRS decision to provide refunds to investors who paid taxes on phantom profits "earned" with Bernie Madoff.
Madoff pleaded guilty last Thursday to 11 charges, including fraud, perjury and money laundering, in what could be the biggest swindle in Wall Street history.
He faces a maximum sentence of 150 years in prison, and the judge immediately jailed him.