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Tax Mistakes Reported by Politicians

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The warnings about potential dangers of trying to file your own tax forms are well-documented. Indeed, IFA Taxes has explored many of the biggest blunders taxpayers have made in the past working on even the most basic of IRS accounting requirements. 

But costly mistakes aren't just limited to common filers. Now comes news of a high-profiled politician who tried to go-it-alone. 

The case involves U.S. Senator Bernie Sanders of Vermont, who is currently running as a Democratic presidential candidate. As part of his campaign, he's released 10-years worth of tax returns. 

A review of such paperwork by the Wall Street Journal found in 2009 his reported returns came up $4,479 short.1  "You need software at some point with the multiple calculations," an accountant who reviewed Sanders' returns told the paper. "It's not easy to do it by hand."

To be fair, a representative of the senator's staff responded to enquiries about the mistakes by issuing a written statement: "Any minor inadvertent errors made were identified soon after filing the original tax returns, and promptly addressed."

At issue was a failure to limit his personal exemptions per IRS rules for higher-income taxpayers, according to WSJ reporter Richard Rubin. Another problem such an independent review found was that Sanders didn't count alternative minimum tax figures into his calculations. 

Also pointed out by the article was possibly claiming a greater deduction for "employee expenses" and "other miscellaneous deductions" than legally permitted at the time. 

Besides these errors, Sanders was thought to have "included all of the couple's Social Security benefits in income, even though only 85% are taxable," the WSJ surmised. 

Fortunately in this instance, Sanders had apparently overestimated his taxes in terms of withholding enough from his pay to avoid forking over a big monetary penalty to the IRS, Rubin noted in his report. He added, however, that in the next tax year Sanders and his wife's returns were "created by a paid tax preparer" who took advantage of professional software to cross-check and prevent cracks showing up in the couple's filings. 

Sanders wasn't the only member of Congress to land in the spotlight for making tax reporting errors. 

Past filings spanning the past 10 years made public in 2019 by Democratic presidential hopeful Beto O'Rourke showed he and his wife made several thousands of dollars worth of mistakes in back-to-back years of returns, according to the Washington Post.2 Those miscuses were credited to faulty deductions for medical expenses. 

Questions about how political candidates handled their taxes, of course, haven't proved problematic just to those on one side of the aisle. In 2012, Republican presidential nominee Mitt Romney's tax filings were criticized by some tax experts. Their concern was that he chose not to take deductions for all of his charitable donations, thereby raising Romney's effective tax rate. "It is quite unusual for people not to take tax deductions that they're entitled to," one tax attorney related to CNN.3

We're not trying to make a political statement here. All of these politicians were open about how they chose to follow appropriate tax filing procedures. But such instances should come as clear red flags to taxpayers of any ilk that even the most seemingly easy filing tasks can create headaches for years to come if not done correctly. 

Please feel free to contact John Dahlin, the head of IFA Taxes, a division of Index Fund Advisors. He has more than a decade of experience advising clients on a wide range of personal and business tax issues.  

Footnotes:

1 = "Bernie Sanders Tax Return Shows Perils of Do-It-Yourself Tax Prep," the Wall Street Journal (May 8, 2019).

2 = "Beto O'Rourke Releases 10 Years of Tax Returns," Washington Post (April 15, 2019).

3 = "Romney Paid 14% Effective Tax Rate in 2011," CNN (Sept. 21, 2012). 


This is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product or service. IFA Taxes does not provide auditing or attestation services and therefore is not a licensed CPA firm. IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. Federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter herein.