A lot of talk has been spreading about Trump’s leaked tax return – most of which is incorrect. Tax prepares around America must be pulling out their hair over the amount of misinformation. The return was recently leaked by an anonymous source and published by the New York Times. The return reveled a few pages from a tax return from 1995 with “The Trump Foundation” at the top of the page. After the return proved legitimate, attacks began to fire from all directions! From Clinton, the Washington post, and many so-called professionals – but their claims only reveals how little they know.
The biggest controversy is with the bottom line of the return showing a 9 hundred million dollar loss for the year. Losses are a normal part of doing business – clients take losses every year! It is as normal as taking tax credits. Even Steve Jobs had a loss of just over 1 billion dollars before he died – but unlike Steve Jobs, Donald Trump is being labelled a crook, a criminal, and a bad businessman. Why? Because the accusers have no idea what they are talking about. Let me explain.
When a business has a loss for the year, they can write off that amount to lower their income for the year. If the amount is greater than the amount of income earned, you are limited to the amount you lost, so to write off the remainder amount, the IRS allows you to carry the amount forward 20 years. For example, lets say my dog, Tax, is in business and losses $500 one year. Next year, Tax makes $250 in business – he can now carry forward the $500 from last year to eliminate the income. And so on until the loss is eliminated or the 20-year mark is met.
Kind of confusing until you write it out on paper. The IRS Publication 536 spells out exactly the same rules I wrote above. Again, it is important to know that people do this all the time. If they couldn’t, then an incredible amount of small businesses would vanish. So the idea that taking the loss is a loophole in the tax code is completely false – regardless if you like Trump or not. It is not a loophole, it is not fraud, it is not irresponsible.
Keep in mind that Trump had hundreds of thousands of stakeholders including employees. investors, suppliers, financiers, and other third-party vendors. In the business world, we call this a “fiduciary duty”. He not only needs to look after himself, but also look after his stakeholders.
The claim that Trump did not pay income taxes for most of the past few decades is true. We don’t have all of his return just yet, but it is safe to say that with a huge loss, no income taxes are paid. Eric Trump even declared that he did not pay income taxes. But what most do not know is that business owners pay so much more tax than just income tax. Every paycheck employers must pay additional FICA and other payroll taxes in addition to employee taxes. They also pay a tremendous amount of city and state taxes as well as provide many people jobs to pay taxes.
To say that Trump’s taxes are fraudulent is to admit you don’t know what you are talking about.