Trump's IRS Settlement: Shielding Past Taxes To Closing Lawfare Loopholes? - Above the Law

A settlement created a $1.776 billion fund to compensate victims of lawfare and weaponization tied to an illegal leak of tax returns. The fund is described as open to any victim, but eligibility is uncertain for Michael Cohen due to disbarment and a federal prison sentence for crimes including tax fraud and perjury. The settlement includes a provision that permanently bars the federal government from investigating or prosecuting Trump, his family, and business entities on matters involving the tax leak, lawfare, and weaponization, including pending matters and tax returns filed before the settlement date. IRS audit timing is generally limited to three years, with longer windows for large underreporting and certain foreign assets, and criminal tax cases allowing audits of any year.

"The settlement established a $1.776 billion fund to compensate victims of lawfare and weaponization. While it is supposedly open to any victim, it is questionable whether former Trump attorney and now critic Michael Cohen would get any payment from this fund. Cohen has been disbarred and was sentenced to three years in federal prison for various crimes including tax fraud and perjury."

"But the settlement agreement also quietly included a provision which forever barred the federal government from investigating or prosecuting Trump, his family, and his entities. This included a ban on auditing their past tax returns. This has drawn outrage from Democrats and skepticism from some Republicans."

"Under the settlement, the federal government is forever barred from prosecuting or investigating Trump, his family, and his business entities on matters involving the tax leak, "lawfare and/or weaponization" (terms which have not been clearly defined), and any pending and could be pending matters, including tax returns filed before the settlement date."

"By law, the IRS already has time limits to audit a tax return. Generally, it is three years from the time the return is filed. But the IRS can have up to six years to audit if income is underreported by more than 25% or if there is an underreporting of $5,000 or more of income attributable to certain foreign financial assets. And in criminal tax cases, the IRS can audit any year."

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