Critics slammed the Internal Revenue Service on Thursday for failing to follow its own rules requiring all presidents to be audited while in office, largely giving former President Donald Trump a massive free pass a few short years before his company was convicted of tax fraud.
The IRS has already audited two years of President Joe Biden’s taxes but has yet to finish a single audit of Trump’s taxes during his time in the White House, even though IRS regulations mandate audits of all presidents. The agency didn’t begin an audit of Trump’s taxes until two years into his presidency. (Joe and wife, Jill Biden, were owed a refund for 2020, and they owed the IRS $13 for 2021, according to their audits, The Wall Street Journal reported.)
The New York Times reported that the lax Trump oversight was due to a funding shortfall at the agency that didn’t provide sufficient personnel to examine Trump’s lengthy, complicated tax filings and many businesses.
It’s a tax-shielding perk of the wealthy — complicated finances along with aggressive professional accountants and lawyers, the Times noted. The IRS simply “lacks the resources to go after rich taxpayers,” the newspaper reported, a problem that had long pre-dated Trump’s time in the Oval Office.
It’s a situation that has created a $7 trillion “tax gap” of revenue over a decade that is owed but goes uncollected, in “many cases from superrich taxpayers” like Trump, the Times reported.
An IRS agent in 2019 recommended a “limited” examination of Trump’s taxes because they were complex, his case was sensitive and he used professional accountants, noted the report released Tuesday by the bipartisan Congressional Joint Committee on Taxation (JCT).
“With over 400 flow-thru returns reported on the Form 1040, it is not possible to obtain the resources available to examine all potential issues,” IRS agents said of Trump’s tax returns in an internal memo that was released by the House Ways and Means Committee this week as part of its oversight of the mandatory presidential audit process.
Use of professional accountants clearly wasn’t any guarantee that Trump’s taxes were aboveboard. The Trump Organization’s accounting agency dropped it as a client in February because it didn’t trust the figures he was providing.
The Trump Organization, a collection of businesses owned by the former president, was found guilty early this month of tax fraud and other crimes.The Manhattan district attorney’s office argued his company engaged in a 15-year tax fraud scheme, with executives reaping off-the-books compensation in the form of gifts to help them avoid paying income tax.
Critics were suspicious that Trump’s free pass was due to much more than an overworked, underfunded IRS. They suspect the agency was also affected by the extreme political partisanship cultivated in the federal government by Trump when he was in office — and was “unusually deferential” to a president used to brazenly breaking the rules, The Wall Street Journal reported.
Daniel Hemel, a tax law professor at New York University Law School, told the Journal that repeated mentions in the JCT report that the IRS assumed the numbers in Trump’s returns were likely accurate because they were professionally prepared was “very strange” and “disturbing.”
The House Ways and Means Committee “expected that these mandatory audits were being conducted promptly and in accordance with IRS policies,” Rep. Richard Neal (D-Mass.) said during the committee hearing Thursday. “Our review found that under the prior administration, the program was dormant. ... This is a major failure of the IRS under the prior administration.”
Trump ignored precedent by flatly refusing to publicly release his tax returns while he was running for the presidency in 2016 — or afterward, when he declared that no one cared about them anymore.
The Supreme Court last month rejected Trump’s final bid to stop Congress from obtaining years of his tax filings.
The JCT summary report on Trump’s joint tax filing with wife Melania Trump from 2015 through 2020 revealed that the couple declared negative income on multiple years’ tax returns and paid $0 in federal income taxes in 2020.