Granting the Trump org’s partial defense of “Every business does it–you’re just picking on us because you hate Trump” for a moment, isn’t that a terrible indictment of the U.S. and state governments that they allow businesses to operate fraudulently in violation of tax laws because they all do it? Isn’t “they all do it” a good reason to crack down on the worst offenders, collecting fines and giving businesses fewer reasons to play fast and loose on their taxes?
You can defend this on two grounds, both flimsy: it’s too costly to pursue tax fraud cases, because the companies have legal departments to make the process drawn-out and expensive for the government, and every business doesn’t engage in tax fraud.
Pursuing tax fraud cases against big businesses and rich people is expensive, but has the potential to increase tax revenue due to back taxes being paid, and increased compliance in general, as well as any fines. Which is why the PTB make sure to underfund the IRS and keep them focused on auditing the little people who may be just doing an honest mistake and don’t have crooked accountants hiding the fraud.
Every one of the friends and family I have had who got in trouble with the IRS or state DORs have actually been fiddling their taxes. They have been indignant not because they didn’t fit their Is or cross their Ts, but because they didn’t believe business owners should be paying taxes like risk averse salary drawing stiffs and because they believed other people were getting away with it for [reasons].
I’ve been audited by the IRS four times in over 30 years of filing returns. Once I genuinely omitted a few thousand in income from an investment due to bookkeeping errors, and twice it’s because my overseas employer reported something incorrectly. The fourth time the audit revealed a calculation error that resulted in me getting a small refund.
I think your second reason is far from “flimsy.” I would imagine very few businesses engage in the type of conduct the Trump Organization was convicted of doing. Even more run of the mill tax cheating is probably pretty rare. The biggest companies have legal ways to avoid paying taxes (that’s another thread) and small companies like I have been involved with have professional tax preparers who are not going to sign off on anything sketchy. My law firm pays every cent of taxes required, and we have never asked our accountant to fudge the numbers. No one likes paying taxes, but intentionally committing tax fraud is probably uncommon. (obviously, it happens. Trump isn’t the only white collar criminal out there)
There are certainly few businesses that engage in tax fraud of the type that the Trump Organization was convicted of - but I don’t think it’s pretty rare ,especially if you are including all taxes rather than just income tax. From the businesses that don’t collect sales tax if you pay cash, to those who have people working “off the books” to those that engage in more unusual schemes like reporting what is actually wages as “non-employee compensation” to avoid Social Security taxes, it’s really not all that rare.
There are a lot of family businesses that do a lot of stuff in what they consider “grey areas” which to my eyes is full on tax evasion.
Example, one family that operates restaurants has a multimillion dollar lake house that is on the company’s books and whose costs are deducted on the company’s tax return, but is exclusively used by the family for their getaways. It is hours away from any of their restaurants, but they will drive a few employees up there once a year thinking that this justified treating this as a business facility.
Another family business that does IT outsourcing has been claiming that their elementary school kids are doing thousands of dollars worth of work every year. I don’t know what the angle is, but “putting your kids on the payroll” seems to be very common and almost always not for any legitimate purpose.
And these are things these folks are bragging about to relative strangers like me (either extended family or fairly casual acquaintances).
Yeah, I guess I agree with that. How common it is I can’t say. I have been involved in a handful of businesses over my lifetime, and none did anything like that. The worst thing I do is put all my families’ cell phones on the company Verizon account. I didn’t do it to avoid taxes, but I guess I am getting a benefit I’m not declaring. (Shit, I guess I am as bad as Trump)
As others have said, I don’t think that it is a flimsy defense to explain that not every business engages in tax fraud. I find Trump’s accusation to be insulting, and that anyone believes him to be even more so.
And little businesses who may not have an accountant at all. I’ve had a couple times the IRS has flagged me for something or other, and I could have spent many hours trying to deal with correcting their error and possibly not being successful, or hand it off to my CPA and ask him to take care of it. Not all small businesses have a CPA, they do their own taxes, which means that not only are they more likely to make mistakes, but they don’t have anyone to represent them when the IRS comes asking questions about a return.
Because they go to these business round tables where many of the business owners are bullshitting about the taxes they evade. At least half is braggadocio, but they also admit to tax crimes they did commit. Someone coming away from that environment would think that tax fraud is common and no big deal.
The other method of decreasing tax burdens is to take advantage of legal loopholes. These loopholes were made by and for businesses, and don’t have to make any sense to a reasonable person. It is entirely possible that they are following the letter of the law here, and that the annual employee retreats legally justify its tax status. I am not an accountant, and I don’t know the exact details, so I’m not saying it is or isn’t one way or another, but I do know a bunch of loopholes that really don’t seem as though they should exist.
And if you know of a way to legally avoid taxes (not illegally evade), is there anything wrong with taking advantage of it? (And I’m not talking about from the standpoint of being an entity large enough to carve out its own tax exemptions.)
Family is interesting in employment law. You are allowed to do a whole lot of things that would be illegal if they weren’t related.
And it’s likely that they don’t understand the nuances of it themselves, but are repeating what they can remember of what their account told them.
I don’t understand amortization/depreciation in the slightest, but I do know that I save a whole lot in taxes when my CPA waves his magic wand over that ledger.
It is silly. OTOH, from what I’ve seen over the years, it appears that one of Donald Trump’s primary philosophies is “rules are for suckers, and it’s better (and more lucrative) to break the rules and then lie about if, if necessary.” In addition to this, he doesn’t seem to understand why anyone would think otherwise, and so, of course, he (and, by extension, his business organization) would believe that everyone else is breaking the same rules that he is.
There’s a big difference between tax avoidance and tax evasion.
Big companies. like wealthy people can afford to employ astute tax accountants who will more than cover their costs by legally avoiding taxes. I spent a couple of years as a sole trader and paid an accountant a modest fee to submit my tax return. He saved me three times his fee by finding deductions I had not thought of.
Avoidance is a different matter. Failure to declare benefits in kind (school fees, spouse’s car costs etc) is pretty common. Brown envelopes (why always brown?) full of notes passed surreptitiously in the pub and Panamanian to Cayman bank accounts where multi-million back-handers can be secreted are two ends of the same tax fraud.
Part of the problem is that most people think that insurance companies and HMRC are fair game. For them, of course, but not for “fat-cat” bankers.
I’m assuming charges, per the title, are a fraction of instances when the IRS has found businesses to have done something wrong. I’m not sure the threshold for charges and I’m not easily finding numbers re: frequency.
This is part of why one of the latest Congressional acts (possibly the Inflation Reduction Act?) dramatically increased funding for the IRS to employ a significant number of officers to go after these issues.
There has become a prevalent sense that “everybody is doing it” and “they never catch anybody”, at least some of which is in fact due to lax enforcement.
It’s pretty well-known social science that an belief that others are cheating significantly increases the likelihood a person will cheat, even if they would otherwise be disinclined to. And conversely, cheating and not getting caught is a very powerful incentive to continue cheating.
Of course certain politicians are very opposed to increased IRS enforcement, for some reason…
To me, the weird thing is that many politicians make all sorts of noise about the massive federal deficit and national debt (especially when there is a Democratic president in the White House) and yet they’re opposed to increased funding for the Internal Revenue Service, even though this is one of the most profitable parts of the federal government.
Well, it has become a tenet of parts of the conservative movement that the IRS is targeting conservative organizations for increased audits and threatening to revoke tax-exempt status for religious groups based on their speech.
Couple that with the belief (expressed up-thread) that business owners and entrepreneurs are legitimately “better” for the economy than wage-earners and it makes sense that a well-funded army of tax auditors wouldn’t be popular with the GOP.
There may also be the more selfish motive that lots of business, especially small ones, are in fact chasing on their taxes.
I notice that most of the wailing I’ve heard from folks about the new rules regarding Venmo (and others) having to report significant transactions to the IRS has come from people that I expect are using it for unreported business income.
And then you have the subset of that group that truly believes “taxation is theft” and lower taxes are always better. So any mechanism to increase tax collection is de facto bad for America.