Posted on 10/23/2020 11:40:44 AM PDT by SeekAndFind
Thousands of Americans see their tax returns audited every year — but it’s safe to say none have seen an audit go on as long as President Donald Trump’s.
Since he first launched a run for the White House in 2016, Trump has declined to release his tax returns. One reason he commonly cites as to why he can’t — including during last week’s town hall event on NBC and Thursday night’s presidential debate — is that he is undergoing audit.
During the debate, Trump again said that he will release his returns when the audit is finalized. “We made a deal, it was all settled, until I decided to run for president. I get treated very badly by the IRS, very unfairly, but we had a deal all done,” Trump said. “As soon as we’re completed with the deal, I want to release it.”
Last week, President Trump said that the audit was “very routine” in response to a question from the town hall’s moderator, Savannah Guthrie. Yet experts interviewed by MarketWatch said that it’s far from routine to see an audit last as long as Trump’s has.
“An audit definitely can drag out,” said Francine Lipman, a law professor at the University of Nevada, Las Vegas, and a certified public accountant. “But not 10 years. That doesn’t pass the smell test.”
Why is President Trump being audited?
A New York Times investigation, which reported that Trump only paid $750 in federal taxes the year he entered the White House, provided more details regarding that audit, albeit not a complete picture.
The Trump campaign noted that the Times story has no allegation of wrongdoing against the president. The article is based on “incomplete documents and is “inaccurate as the President has paid tens of millions of dollars in taxes,”
(Excerpt) Read more at marketwatch.com ...
Trump paid $70.1 million in income taxes from 2005 to 2007, according to the Times story. It also noted that in the 2016 and 2017 tax years, Trump paid a total $5.2 million, but those payments were “rolled forward to cover potential taxes in future years” while the president tapped tax credits to address his tax liability.
The audit centers on Trump’s 2010 tax return, through which he claimed and received a refund totaling $72.9 million, according to the report. That amount includes all of the federal tax he had paid from 2005 until 2008 plus interest. The refund was made possible through some $1.4 billion in losses that Trump claimed for his core businesses in 2008 and 2009.
Given the size of the refund, Trump’s audit is very much unlike what the average American would experience if their return were to come under scrutiny from the Internal Revenue Service. But even among high-net worth individuals, an audit like Trump’s is highly unusual in many ways, experts said. The Trump Organization did not respond to request for comment on the audit.
People who make more money are more likely to be audited, there’s an exception to that rule: People who claim the Earned Income Tax Credit.
This tax credit is targeted toward low-income Americans. And in terms of numbers, the IRS processes far more audits of these taxpayers than it does for any other group of people. Of the roughly 681,000 returns that were examined in fiscal year 2019, more than 301,000 were for individual returns where this tax credit was claimed, according to IRS data.
These audits are highly automated affairs, but that doesn’t mean they go by all that quickly. Experts say that the typical audit takes anywhere from three to nine months to be resolved.
On its website, the IRS notes that a statute of limitations generally limits the amount of time to assess additional tax on a return to three years from when that return was due or filed. However the agency can request an extension if an audit is not resolved.
(The IRS did not immediately provide comment when asked for data regarding the average duration of audits.)
“People have this conception of an audit that the IRS is going to knock on your door and talk to you,” said Michelle Drumbl, a professor and director at Washington & Lee University School of Law’s Tax Clinic. “The majority of audits would be done by mail.”
Mail-based audits are also known as correspondence audits. In many cases these audits are triggered when the IRS’ system flags a return for some issue, whether it’s a question about a taxpayer’s qualifying for the EITC or something as simple as a math error. The agency then sends the taxpayer a letter informing them that they’re being audited.
The language of these letters can leave taxpayers confused, experts told MarketWatch, which can draw out the process if they don’t respond expediently. It’s “very common” for taxpayers to not even understand that they’re under audit, Drumbl said. “The notices are very boiler-plate, catch-all.”
Typically, the letter will request documentation to clarify the perceived error or justify the claiming of a tax credit. Taxpayers then send those materials to a specific IRS campus to be processed to determine if enough documentation was provided.
While a taxpayer can respond on their own, IRS agents have little leeway in what they can accept. And taxpayers are not always aware of the required documentation, especially when it comes to providing proof that you have children in your household for the EITC.
Low-income taxpayers may have access to pro bono attorneys who can help them with their audit. Even then though, there are limits to what a lawyer can do to speed up the process in most situations beyond helping their client come up with the right paperwork.
“I have no ability as a lawyer to cut through the red tape,” Drumbl said. Taxpayers can call the IRS for clarification, but when they do they can expect long waits on hold. For these audits, though, the IRS doesn’t assign an examiner to a specific audit, so multiple agency employees will handle a case. That can make getting clear answers over the phone more difficult.
Tax experts interviewed by MarketWatch noted that when high-net-worth individuals like President Trump face an audit, their legal or financial counsel can take steps to an extend an audit to ensure a more beneficial outcome.
“If you’re represented by counsel, you just turn this over to your accountant or lawyer and they handle it,” Lipman said. “Donald Trump isn’t interacting directly with the IRS at all.”
When audits are performed on sizable returns or in scenarios where a taxpayer owns multiple businesses, an office or field examination may occur where the taxpayer or their representative meets in person with an IRS agent to go over materials.
“That elevates it to a much more sophisticated level,” Lipman said. “You’re working one-on-one with someone, which very much humanizes it. It beats people answering the phone.”
The IRS stipulates that the individual tax returns for the president and the vice president “are subject to mandatory examinations.” The policy has been in place since the Watergate scandal — meaning that every president since Richard Nixon has had their income tax returns audited.
The IRS handbook stipulates in detail how these audits are performed. Specific personnel are assigned to the audit, and the agency works with representatives for the president and vice president during the review. Personnel are even required to keep the returns locked in a secure drawer and kept in an orange folder.
I can understand why Trump's attorneys would advise against the release of the tax returns. Why let thousands of hostile opponents have access to them so that they can go through them with a fine-tooth comb and pass along investigative ideas to the taxing authorities?
I would bet an ice cream bar that Trump has been audited every year for over 20 years.
I remember a photo of him signing his tax returns..I don’t remember what year.
The stack was over 2 feet tall...as there has to be a return for every state he does business in, and the Fed return has to be attached to each state return.
Must be personal signature-—NOT electronic pen.
Rush complains about being audited by NY for years after he left the state.
Many of those business losses ere triggered by allowing Indian casinos in multiple states.
Atlantic City turned into a ghost town.
I thought wealthy taxpayers, especially those on the political right, like Trump and Rush Limbaugh, are under continuous, never ending audits.
Many of those business losses ere triggered by allowing Indian casinos in multiple states.
Atlantic City turned into a ghost town.
So true
Plus AC never matured into anything other than gambling, at least Vegas turned to entertainment and family entertainment
I was told I owed $10,000 from the year 2014 and in the end it took many letters and a manager in another state to stop the letters being sent again and again from these 2 IRS agents in another state saying I owed even though it was settled. I bet the IRS hands out bonus money or trips to hawaii for drumming up business for the IRS.
#6 the IRS must have missed all the bribe money the obamas and Biden were getting.
Best strategy is to ignore the first 2-3 letters. Unless they have reason to think you owe a huge amount in taxes, they will give up and just go away.
I got two of these letters about 17 years ago. They each asked me to sign a contract agreeing to a stipulated income. Yeah, like I was going to do that.
I called the IRS and talked to what seemed to be a revenue agent. He was very polite. I asked him if the letters the IRS wanted me to sign were contracts. He agreed that they were. Then asked him if he really though I was going to sign the contract. Based on part of out earlier conversation, replied, “I guess not.”
Then asked him to send me a copy of the statute that required me to file a return based on my circumstances. I specifically told him to provide the statute enacted by Congress and signed by a President. I also informed him that I knew such a statute doesn’t exist and that the IRS manual is not a law. Have not hear from the IRS since that time.
I had a client that officed in the same building as a regional IRS cell. I hated going there.
Scary place to be at lunch or quitting time or to walk by the smoking station. First the risk of being run over as they flee the building but most disturbing is the type of people you can see who have access to all of your financial information. Terrifying.
As for Trump, the IRS is a political tool and like the FBI is out of control. What motivation do IRS have to complete the audit so long as it inflicts pain and damage to Trump?
Losses in 2008 and 2009? Imagine that. Wonder what happened then that caused all that? IRS is just pissed off because Trumpy Bear got money back because he lost money. Sounds legal to me.
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