In Trump's approach to tax audits, a familiar legal strategy: delay
The IRS auditors assigned to former President Donald Trump's taxes grappled with a tactic that is used frequently by Trump's legal team — delay — according to a congressional report released Tuesday.
The House Ways and Means Committee revealed in a report this week that although the IRS has a mandatory audit policy it applies to the president and vice president, "it leaves numerous aspects of the audit process either ambiguous, unaddressed, or up to an auditor's discretion," and "it does not specify the scope, length, or depth of the IRS's examination of the returns."
The IRS started, but did not finish an audit of Trump's 2016 return. It did not complete any mandatory audits of Trump's taxes during his presidency.
"There were no indications in the audit files that the former President took steps to expeditiously and timely resolve outstanding tax issues while in office…," the House Ways and Means Committee wrote in its report on the IRS' mandatory audit of the former president's taxes. "There also were efforts to prolong the examinations by taking certain actions."
Committee staffers wrote that his legal team's efforts included "failing to provide all the facts needed to resolve certain issues, and stating, in some cases, that they 'would likely have additional relevant facts to present in its protest or at appeal.'"
The committee cited notes by IRS agents that the delay tactics had caused tensions between the IRS and Trump's counsel. Similar tensions have flared recently in several of Trump's court cases, too, where the judge and opposition lawyers have accused his team of seeking to drag out litigation.
On Wednesday, a federal judge presiding over a pair of lawsuits filed by writer E. Jean Carroll against Trump, alleging rape and defamation, heard arguments about a timeline for trial. Carroll's team argued all pretrial filings could be completed by Feb. 23, 2023, with a trial scheduled for April. Trump's team said it would need until October 2023 for a trial.
Carroll's attorney pointed out that Trump's team appeared to be proposing a date it knew would ultimately require rescheduling — because of another Trump-related trial already scheduled to take place.
"That actually means that the trial date they're proposing probably overlaps with when the New York Attorney General's trial is happening, which is in October. The reason I know that, your Honor, is because we had scheduling issues with Trump's lawyers in another matter pending in this court … and the question of Attorney General James' trial was a big issue there," said Carroll's attorney, Roberta Kaplan. The judge later approved Carroll's proposed schedule.
The New York attorney general's case mentioned by Kaplan was itself the subject of a heated argument on Nov. 22 about alleged stalling tactics by Trump's team.
Kevin Wallace, the New York attorney general's lead counsel on a civil case alleging widespread fraud at the Trump Organization, said Trump attorneys "have been drawing out this pretrial process," by filing motions similar to ones already rejected by the judge, "and I think that this is all just their game of delay, delay, delay."
The judge agreed, setting the October 2023 trial date — that is now in conflict with Trump's requested schedule in the Carroll case — instead of the Trump team's proposal of nearly a year later.
"I think it was Yogi Berra, unless it was Casey Stengel, who said it's 'deja vu all over again,'" Engoron said, referring to a famous line attributed to Berra, the New York Yankees Hall of Fame catcher.
Trump's attorney, Alina Habba, then asked the judge to recuse himself from the case — a move that would have delayed its progress — accusing him of "a clear bias against our client."
After the Nov. 22 hearing concluded, Habba walked a block north to Manhattan Criminal Court, where other Trump Organization attorneys were fighting a losing battle against New York State tax fraud charges.
The judge in that case seemed to agree with accusations that the Trump team was trying to delay its progress, during a pretrial hearing on Sept. 12.
"One of the accusations is that the defense is trying to stall, you know, it's starting to feel that way a little bit," said Judge Juan Merchan, while rejecting what he called "eleventh hour" motions in the case.
Using delay as a strategy is as common in tax audits as it is in court proceedings, according to Bruce Dubinsky, a forensic accountant who has consulted for both the government and defense team's in high-profile criminal tax cases.
Dubinsky said IRS agents are typically constrained by a three year statute of limitations, which provides incentive for those being audited to put up roadblocks.
"Part of the process of dealing with these audits is delay, delay, delay. It's the same thing with criminal defense," said Dubinsky. "The good criminal defense lawyers in any docket will tell you if we can delay the trial, and just delay, delay, people lose interest and maybe my client won't be found guilty."
That tactic is especially useful for people like Trump facing audits covering multiple years.
"If they don't finish a prior year and they can't issue their (notice of taxes owed), that year goes away and they lose everything. So they will work from the oldest open year first knowing that the statute of limitations is open," Dubinsky said.