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Trump’s Tax Audits Still in the News

Trump’s Tax Audits

Donald Trump’s tax returns have apparently been audited every year since 2002 which is not surprising since tax audit data from the Internal Revenue Service indicates that larger and more complex tax returns are much more likely to be selected for examination than those that are simpler and more straightforward. Trump is reporting income and losses from hundreds of sole proprietorships on his personal income tax returns, making them very lengthy and convoluted. Although the tax audits for 2002 through 2008 have been administratively closed with no assessment of deficiency, his lawyers have indicated that some of the information on these returns has been carried forward to the returns for tax years 2009 and beyond which are still under audit. This is one of the reasons that Trump has announced that he will not release any tax information until all audits are concluded.
Although a tax return can be selected for an audit though the process of random sampling, there are certain characteristics that increase its chances of being chosen. It appears that Donald Trump’s tax returns may contain all or most of these red flags. Taxpayers with high incomes, especially in excess of $250,000, are much more likely to be audited than low income taxpayers. Trump almost certainly fits in this category. In addition, his returns have likely reported sizeable charitable contributions as well as numerous and complex business deductions, two of the other reasons that a tax return is more likely to be selected for further examination. If foreign assets or businesses were involved in any way, that is yet another reason for increased scrutiny.
In the case of Donald Trump or any other business or individual taxpayer, the receipt of a Notice of Intent to Audit does not necessarily mean that the IRS suspects any wrong doing or even that they believe there is an error on the return that is being audited. It simply means that they want to verify the accuracy of certain income or deduction items that have been reported. To that end, the official IRS Notice will always contain a specific list of the documentation being requested as well as a statement of the deadline for submitting it. Although some audits conclude with an additional tax assessment, many result in the audited returns being accepted as is with no additional tax amount due. This was apparently the case with Trump’s returns for tax years 2002 through 2008. No matter what the outcome, an audited taxpayer has the right to appeal the final audit decision as long as the request is submitted to the IRS Appeals Division within 30 days of receiving the final report of the auditors.
Only time will tell what the outcome will be for Donald Trump and whether he will ever share his tax information with the public. We can be sure of one thing, however. His accountants and bookkeeping services providers are very busy these days!
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