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Tax happenings in 2022, and what to expect in 2023

Trump's taxes reveal turns us all into auditors, but where was the IRS?

Donald Trump signing his huge tax return October 15 2015_Twitter2a
Before the House Ways and Means Committee released six years of Donald J. Trump's federal filings, the last time was got an ostensible glimpse of the former president's Form 1040 was back in October 2015. That's when he shared this photo on his Twitter account of him signing what he said was his federal tax return for that year.

With just a few hours left in 2022, some of us are doing some last-minute tax accounting. OK, maybe that's just me and a handful of others who've already planned our annual living room countdown to 2023.

I know that one person for sure has taxes on his mind, although it's not his 2022 return.

Donald J. Trump instead is stewing, much of it publicly on his Truth Social platform, about the decision by Democrats still in control of the House Ways and Means Committee until early next year to release several years of his tax returns.

Trump's no-longer-hidden taxes: You can find the years of Internal Revenue Service paperwork online. My Googling of "Trump's tax returns" just turned up around 113,000,000 results in 0.97 seconds.

I'm definitely not the only one who's sneaked a peak.

And all this interest means that the thousands (or more) of us — private citizens, journalists, politicians, pundits, and members of the professional tax community — have become, for better and likely for worse in many cases, unofficial auditors of the former U.S. president's tax filings.

I'm not going to get into the opinions and perspectives of those who've been walking into the tall tax weeds of Trump's federal returns for 2015 to 2020, along with tax records for some of his business entities.

But all the eyes now on those forms does raise the question of just where were the official IRS auditors?

IRS overlooked audit of Oval Office occupant: In addition to learning about Trump's taxes and finances, we also discovered that the reportedly regular practice of annually auditing the federal returns of a sitting president was not followed in 45's case.

"These findings underscore the fact that our tax laws are often inequitable, and that enforcement of them is often unjust. Trump was able to bypass even the mandatory IRS presidential audit program for years, but many other wealthy and powerful people evade billions in tax dues every year through more quotidian tax avoidance," said Rep. Don Beyer (D-Virginia), who serves on the Ways and Means panel.

The question as to why Trump's taxes were given a pass for a couple of years he sat in the Oval Office is the focus of this weekend's New Year's Eve Saturday Shout Outs.

Here goes.

We've Learned The IRS Was Slow To Audit Trump's Tax Returns. We Need To Know Why, writes Howard Gleckman at TaxVox, the Tax Policy Center's blog. He notes —

"While there is no statutory requirement for these audits, the agency's own rules have mandated a review of the president's and vice president's returns for nearly a half-century--since 1977. The IRS's staff manual says explicitly, '[t]he returns require expeditious handling at all levels to ensure prompt completion of the examinations.' 

But the Ways & Means description of IRS activities tells a very different, though complex, story. During Trump's term in office, the agency designated only one return, for tax year 2016, for a mandatory presidential audit."

Why and When Did the IRS Stop Auditing the President? asks Joseph Thorndike in a Tax Notes Opinions column. He follows up that headline question with more queries —

"Specifically, why did the IRS fail to audit Trump for the first two years of his presidency? Why did the agency ignore its own rules requiring mandatory audits for all presidents? And why did those audits begin only after Congress started asking about them? 

These are not trivial questions. They concern much more than just bureaucratic mismanagement at the nation’s tax agency. The presidential audit program was created to ensure that presidents are following the law — that the tax collector in chief is also a tax payer in chief. Providing that assurance is crucial to shared notions of fiscal citizenship — and to the viability of the tax system itself."

The IRS Audits Trump, writes Iowa Law School professor Andy Grewal in the Yale Journal on Regulation. In his preface to his analysis of the mandatory audit program for Presidents, he notes —

"The W&M report along with the related Joint Committee on Taxation report show that Trump had ongoing audits with the IRS before he assumed office. The IRS continued those audits throughout the Trump presidency. However, the IRS did not immediately commence 'mandatory' audits for returns that Trump filed after becoming President. … Whatever the reason for the IRS's delayed audits, they do not appear to be politically motivated. The delays, after all, were not limited to the Trump Administration. The IRS, under the Biden Administration, did not select Trump's 2019 return for audit until April 2022. Trump's 2020 return still has not been selected for audit."

Another shout out goes to the process the House tax-writing committee used to make Trump's taxes public, and the future problems it could cause.

Did The Ways & Means Committee Play The Supreme Court On Trump's Tax Returns? asks Josh Blackman in a post at The Volokh Conspiracy. "In the long run, the Supreme Court may be less-deferential to House oversight requests," Blackman writes, adding —

"The Ways & Means Committee insisted that the returns were necessary for a legislative purpose. Then the Committee releases all of the returns, without any explanation for why that disclosure served that legislative purpose. Trump's arguments about pretext look a lot stronger. Wouldn't it have been enough for the Committee to simply request information about how often the returns of Trump, and other Presidents were audited? Why were the specifics of the returns needed? In the long run, the House will feel the burn."

Finally, we have somewhat of an explanation as to why the IRS neglected its presidential audit responsibilities.

In a discussion with NPR's with A Martínez as to Why did the IRS neglect to audit Trump during his first 2 years in office? former IRS National Taxpayer Advocate Nina Olson comments on this special audit and the minefield the agency must maneuver in trying to not appear political. She says —

"On the other hand, you've also got to treat it so that if there's a rule that says you're going to do a mandatory audit, then you better do the mandatory audit, or it looks politically motivated that you're not doing the audit. And so you really need to hew to those provisions. And in this instance, they didn't.

I think what is interesting is they — it seems like they tried to follow through their normal procedures. They were confronted with a highly complex return. They kept noting in the files that there were over 400 what we call passthrough entities, which might have been schedule C sole proprietorships, partnerships, limited liability companies, all of which report some income, but then pass it through to the actual taxpayer, underlying taxpayer, in this case, the former president. So it's sort of like a spider web of relationships, which requires a lot of looking at, which is partly why maybe some of the returns were selected late because they hadn't wrapped up the earlier returns…"

Time in 2023 for more taxes: Personally, I'm staying focused on my own current year tax return, and leaving the ad hoc auditing of Trump's now public 1040s to others.

I will admit, however, that all the various assumptions, explanations, apologies, angst, anger, and conjecture do make for interesting reading, if not solid tax answers.

Maybe we'll get some of those in 2023. Or not. I'll worry about that later. Now is for the annual celebration of Father Time passing the torch to Baby New Year.

Enjoy your choice of New Year's Eve revelry safely. I want to see you back here tomorrow, in brand spanking new tax year 2023!

You also might find these other shameless self shout out items of interest:







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