IRS didn’t look too closely at Trump’s tax returns congressional report says

• In 2019, an IRS agent suggested a “limited” examination of Trump’s taxes.
• Agency failed to thoroughly audit Donald Trump’s tax returns while he was president.
• Using accountants does not ensure financial integrity.

In 2019, an IRS agent suggested a “limited” examination of Trump’s taxes due to the complexity of the returns, the sensitivity of the situation, and the employment of qualified accountants.

Democrats in the House are investigating why, despite an IRS regulation requiring such a review, the agency failed to thoroughly audit Donald Trump’s tax returns while he was president.

A study released on Tuesday by the Joint Committee on Taxation (JCT), a bipartisan congressional body that looked into Trump’s tax returns from 2015 to 2020, offered some explanation for the oversight.

According to the report, one of the reasons the IRS believed Trump was innocent was because he engaged certified public accountants to prepare his tax returns, a common practise among the wealthy.

Using accountants does not ensure financial integrity. In fact, after concerns were raised regarding the veracity of the information he was providing them with, Trump’s own accountants left him this year.

Despite a rule requiring the IRS to examine the returns of a president while in office, the organisation did not start auditing Trump’s returns until 2019 – two years into his term and after Democrats won control of Congress.

Although the JCT stated in its findings this week that it was unable to speak with any IRS agents directly, a study of the audit materials revealed that the agent who conducted a “limited scope” “preliminary risk analysis” of Trump’s 2015 return backed this conclusion.

The agent noted that the taxpayer hires a professional accounting firm and counsel to prepare and file his tax returns, and those parties perform the necessary activities to ensure the taxpayer properly reports all income and deduction items correctly, the report said. This is additional evidence in support of a limited examination, the agent said.

The JCT questioned why the IRS agent who was assessing the return gave the involvement of accountants such much weight in its decision.

The report stated, “We also fail to comprehend why the participation of counsel and an accounting company in tax preparation ensures the correctness of the returns.” We would imagine that most, if not all, high-net-worth persons’ returns would reflect this fact, and we don’t think that this justifies subjecting such people to audits with a narrow scope.

Steven Rosenthal, a senior scholar at the Washington-based Urban-Brookings Tax Policy Center and a former tax attorney, said: “It does seem unfair.”

The IRS’s excessive dependence on and deference to certified public accountants, he continued, “illustrates how outgunned the IRS is.”

According to a 2019 ProPublica investigation, the IRS audits working-class Americans at a rate that is roughly equal to that of the richest 1%, in part because audits of wealthier Americans take more time and resources.

The information in the report that suggested the IRS may have curtailed its investigation into Trump’s taxes due to “case sensitivity,” according to Rosenthal, bothered him the most.

Given how the return related to numerous other Trump entities and earlier returns, the agent acknowledged the “complexity” of the review. However, the agent “decided not to utilise the Specialist Referral System in the practise network unless absolutely necessary (due to case sensitivity); consequently, no specialists were assigned,” according to the JCT report.

In other words, the JCT research shows that the agent in charge of the 2015 review did have other options for handling the substantial and intricate nature of Trump’s taxes.

The JCT study stated that while an examination of Trump’s 2016 taxes that was initiated later in 2019 was included in the statutory presidential review, the audit of Trump’s 2015 taxes was not.

Compared to the 2015 audit, that audit raised more issues and required more supporting paperwork, but the JCT still identified a dozen additional areas where the agency should have demanded more information, including $40 million in deductions.

The 2016 audit’s agent was reprimanded by the JTC for having too much faith in Trump’s accountants.

Despite the fact that the IRS investigated more problems in 2016 than in 2015, the study stated that “we are not comfortable with any reliance on expert tax preparation to ensure accuracy, and it does not appear any professionals were called in to assist.” We are unable to comment on the audit’s findings because it has not been completed.

In response to a request for information on how it considers the employment of accounting firms in its auditing determinations, the IRS declined to comment on the committee’s report and did not respond.

Following a vote by the House Ways and Means Committee to release Trump’s 2015–20 tax returns, the JCT report was released on Tuesday. Since the 1970s, Trump was the first president to not release his tax returns.

The returns were supposed to be released this week, but the chair of the Ways and Means Committee, Richard Neal, a Democrat from Massachusetts, told reporters on Thursday that they might not be until the “next couple of days” because staffers were still redacting private information from the documents.

Neal is urging lawmakers to pass legislation requiring the IRS to release and examine presidential tax returns.

The tax returns were created by the accounting company Mazars, which left its position with Trump and the Trump Organization this year after inquiries by the Manhattan district attorney and the New York attorney general raised concerns about data Trump’s entities had been giving Mazars for years.

Since then, Letitia James, the attorney general of New York, has filed a $250 million lawsuit against Trump and his company, alleging that they inflated the company’s net worth by billions of dollars in order to obtain better terms from banks and insurance providers, including on ten years’ worth of Mazars-prepared financial statements.

Mazars Group General Counsel William J. Kelly stated in his resignation letter to the Trump Organization in February that “the Statements of Financial Condition for Donald J. Trump for the years ending June 30, 2011 — June 30, 2020, should no longer be relied upon and you should inform any recipients thereof who are currently relying upon one or more of those documents that those documents should not be relied upon.”

James also informed the IRS of her findings via a criminal referral. In September, an IRS Criminal Investigation (IRS-CI) representative revealed that the organization’s criminal section “receives tips about possible criminal conduct from a variety of sources every day. For a more thorough criminal investigation, special agents evaluate the information obtained. The agency won’t confirm any investigations until court records are made available to the public.

In response to James’ accusations, Trump’s attorney Alina Habba stated: “We are confident that our judicial system will not stand for this unchecked abuse of authority, and we look forward to defending our client against each and every one of the Attorney General’s meritless claims.” Trump has denied any wrongdoing.

Also Read

Trump Organization finds guilty on all counts of criminal tax fraud

The Trump Corp. and Trump Payroll Corp. are convicted of tax fraud...