The Weisselberg Indictment Is Not A "Fringe Benefits" Case

[kpete]

Daniel Shaviro/Just Security:

Grasping the Full Scope of the Alleged Criminal Scheme

In the days before the July 1, 2021 issuance of the Manhattan District Attorney’s Weisselberg-Trump Organization indictment, public anticipation was positively underwhelming. It would just be a fringe benefits case, we were told – meaning, a dispute, of a picayune sort that almost never yields criminal charges, regarding whether or not an employee’s use of, say, a company car or apartment yielded taxable income, in the face of admitted personal benefit but also with plausible claims of business purpose other than the purely compensatory. Everyone does it, we heard, and it shouldn’t be the basis for a criminal fraud charge. What’s more, this ostensibly would just be a New York State or City income tax issue, not federal, thus limiting the scale and monetary significance of the claimed wrongdoing.

Then the indictment dropped, and it turns out that public expectations could scarcely have fallen further short than they were of the magnitude of what was actually being charged. Let me spell out the particulars under several headings:

1. This is no mere fringe benefits case. It is a straight-out fraud case, claiming that the defendants kept double books: phony ones to show the tax authorities, and accurate ones to be hidden from view. The question of whether a given company apartment or car might in theory (with appropriate supporting facts) have been an excludable fringe benefit turns out to be almost completely irrelevant. A better analogy to what is being charged here is the following: Suppose that your employer pays you monthly, through automatically deposited paychecks that end up being included on your annual W-2. But suppose that each month you could stop by the front office, request an envelope full of cash in unmarked bills, and have your W-2 reduced accordingly. So your true income would be the same as if you hadn’t stopped by, but you’d be reporting less salary. If your employer kept careful records of all the cash it gave you, and also still deducted it all, we would basically have this case. That is far different from simple failure to pay taxes on fringe benefits, which is how the indictment has been widely misunderstood, thanks in part to Trump’s defense lawyers’ laying the groundwork before the charges were made public on Thursday.

..................

Way more & well written:
https://www.justsecurity.org/77331/the-weisselberg-indictment-is-not-a-fringe-benefits-case/

[spooky3]

1. I think these stories overly complicate the tax issues.

I wish they were more direct so that the average person could more easily understand.

Paying grandchildren’s tuition and apartment rent is NOT excludable from the recipient’s income. The employer deducted it all, which they can generally do, but also must pay payroll taxes (eg unemployment comp) on all income to recipient, which Trump apparently didn’t do. The practice enabled Trump to essentially pay Weisselberg a higher salary more cheaply, AND greatly reduced Weisselberg’s income taxes.

The easiest way to make it relatable is to say “what if your employer paid all your rent and credit card bills directly, and you didn’t report this on your return? You’d pay a lot less in taxes. Now multiply that by 10 or 100 times per year (because Weisselberg was making about a million or more a year) for 15 years.”

(I worked for the IRS years ago.)

[OAITW r.2.0]

2. I don't believe that the Trump Org did this out of love for Mr. Weisselberg.

Getting the CFO in on the tax fraud made it easy to get him to under-report the corporate taxable income. He got some relatively small financial benefits, but the Trumps probably made 100's of millions with his creative accounting.