It is time to put an end to the fiction that “under audit” is a valid reason for President Donald Trump to hide his tax returns from the American public. As April 15 approaches, I would like to share some thoughts on the nature of tax filings, audits and the fog that Trump and his spokespeople have spewed over these topics. They are relying on the average voter’s aversion to even thinking about taxes (theirs or anyone else’s) as a way to avoid uncomfortable issues.
We have been told for over a year now that Trump cannot (more accurately will not) release his tax returns because they are “under audit” and there is nothing to see there anyway. This is false, or at best, .01 percent true.
The Internal Revenue Service has rules about when audits can occur and how they can be conducted. In simplistic terms, a taxpayer’s return is “open” or subject to examination for three years after it is filed. If you have a straight-forward tax return and filed your 2013 return on April 15, 2014, the IRS must complete its audit of that return by this coming April 15. After that, the return is “closed” and no longer subject to IRS scrutiny or audit adjustment.
There are a few exceptions to 2013 returns “closing” on April 15. Many people take advantage of the available automatic extension of time to file their taxes, and the IRS is more than happy to oblige. Simply send in a one-page extension request (you don’t even have to sign it). Nominally, you are supposed to pay all taxes you owe with that extension form, but if you don’t pay or can’t pay you are essentially borrowing the unpaid amount from the government at 12 percent interest. You don’t need their approval to delay paying.
The “extended” due date is Oct. 15. Complicated returns, and I submit that Trump’s returns are probably as complicated as returns get, are almost always extended. That means that if Trump filed his 2013 return in a timely manner, it could be open until Oct. 15.
There are other reasons a return could be held open for the IRS to look some more.
The IRS can simply ask you to keep it open. Sometimes there is an audit in process, and the IRS can ask you to hold the return open so it can complete its audit. You don’t have to agree, but it is somewhat expected you will. Another is that if the IRS has discovered a substantial understatement of income (read: “tax fraud”) it can then keep returns open to audit an additional three years. Rare, but possible.
In my experience, early 2017 is when the IRS is selecting what 2015 returns it would like to audit. During 2017, it will be working hard to complete audits on 2014 returns so the audits will be completed before the window closes in 2018. As far as letting the public see a return you have filed, the IRS does not care, even if it is under audit. The return is your document and your representations. Put it on the front page of the New York Times or the National Enquirer, the IRS does not care. The only rational reason for not releasing a return because it is “under audit” is that you do not want the media scrutiny that would result, possibly finding something that the IRS auditors might not. If your representations are not completely correct, you would be much more comfortable dealing with a poorly paid IRS audit team when the auditors are not assisted by the hundreds of thousands of curious bloggers, accountants, media, etc., who are going to be all over these returns like flies on you know what.
So, on April 15, or more likely Oct. 15, Trump’s 2013 filing is no longer under audit unless he wants to be audited longer or there is alleged fraud.
As of right now, presuming no fraud is being investigated, all Trump’s returns before 2013 are closed to IRS scrutiny so there is no “under audit” excuse for not sharing them. We can wait to look at 2013 to 2015 returns. Show us returns for 2012 and before. How about 10 years’ worth of returns? Most public officials have revealed far more. Hillary Clinton’s returns have been shared back to the 1970s. As citizens and the president’s employer, we need a lot more than the brief flashes of tax information that have leaked out so far. A state return from the 1990s and just the 1040 single form itself from 2005 tell us almost nothing.
What could a tax return show us?
The answer is that on its surface a tax return doesn’t really reveal much. It shows what you represent is your income or loss in various categories. It shows what you claim as deductible expenses, charitable contributions and tax credits. It shows what you paid in taxes. Put out page 1 and 2 of a 1040 and journalists and pundits can breathlessly discuss your marginal tax rate, the millions in taxes you pay and how you compare to other taxpayers. Nothing burgers.
A tax return will not show who you borrowed money from, whether it’s Citibank, the Chinese government or the Russian mafia. It will not show if you received a $1 million-dollar-a-day rental on a luxury suite in New York City or Washington from some Saudi Arabian sheik. It will not reveal who you might owe business favors to.
But there is one aspect of a return that will yield a tremendous amount of information and give insight into who Trump does business with and who he might be beholden to.
On your tax return, you have to disclose the name and tax identification number of every partnership, limited liability company, trust and Subchapter S corporation that you have an ownership interest in. With that information, the very smart people who investigate such things will be able to learn who your partners are (or what shady Panamanian law firm, Grand Cayman or Cypriot bank or blind trust they are hiding behind) and what business ventures those entities are involved in.
Reputedly Trump is involved with more than 500 such entities. It will take a bit of doing but I am sure the results will be very illuminating.
We must stop allowing our president to hide from us.
(Richard LeClair of Canterbury has been a CPA since 1974.)