President Joe Biden may owe up to $500,000 in back taxes, according to the analysis of a new nonpartisan government report. A Republican Congressman claims that President Biden improperly avoided paying Medicare taxes before he took office.
At the request of Rep. Jim Banks (R-Ind.), the Congressional Research Service furnished a report analyzing “cases in which the IRS won a judgment against taxpayers who paid themselves suspiciously low salaries from S corporations and counted most of the revenue as ‘distributions’ exempt from the Medicare tax,” according to the New York Post.
“Banks said the report shows Biden improperly used ‘S corporations’ to avoid paying Medicare tax on speaking fees and book sales in 2017 and 2018,” the Post reported.
The tax loophole allows self-employed people to set up an S corporation in order to avoid payroll taxes – including Social Security and Medicare taxes.
President Biden and first lady Jill Biden purportedly raked in more than $13 million through book sales and speaking fees in 2017 and 2018, but counted less than $800,000 of the income as salary eligible for the Medicare tax — exempting the rest from being taxed 3.8% for Medicare.
A Wall Street Journal report from 2019 titled “Joe Biden Used Tax-Code Loophole Obama Tried to Plug” stated, “Mr. Biden and his wife, Dr. Jill Biden, routed their book and speech income through S corporations, according to tax returns the couple released this week. They paid income taxes on those profits, but the strategy let the couple avoid the 3.8% self-employment tax they would have paid had they been compensated directly instead of through the S corporations.”
Rep. Banks, who is chairman of the conservative Republican Study Committee, said, “Joe Biden wants to raise taxes by $2.1 trillion while claiming the rich need to pay their ‘fair share.’ But in 2017, multimillionaire Joe Biden skirted his payroll taxes — the very taxes that fund Medicare and ObamaCare.”
“According to the criteria CRS provided to my office, he owes the IRS and the American people hundreds of thousands of dollars in back taxes,” Banks said. “Every American should know about Joe Biden’s tax hypocrisy.”
Biden has branded himself “Middle Class Joe” and has frequently demanded that wealthy Americans “pay their fair share.” On Wednesday, Biden wrote on Twitter, “I’m sick and tired of the super-wealthy and giant corporations not paying their fair share in taxes. It’s time for it to change.”
The CRS report, which doesn’t name Biden specifically, cites examples of individuals using the S corporation loophole to skirt employment taxes.
“Courts have agreed with the IRS that shareholder-employees are subject to employment taxes when shareholders take distributions, dividends, or other forms of compensation in lieu of reasonable compensation,” the report states.
When questioned about the practice in 2020, the Biden campaign said, “The salaries earned by the Bidens are reasonable and were determined in good faith.”
The report from the CRS, which operates within the Library of Congress, notes that presidential tax returns are subject to automatic audit only for years when a president is in office.
In May when the Bidens released their tax returns to the public, White House press secretary Jen Psaki said Biden’s S corporation will “remain dormant.”
“Well, I will say first that he received no income from a CelticCapri in 2020, which is the S-corp and it’s dormant and it will not be engaging in any business other than to receive potential royalties, which would relate to books he has already written and of course, as you know, you only know about this because the President released his tax returns, which has long been history — historic precedent even if it wasn’t over the last several years. In terms of additional tax reform proposals, I don’t have any to announce for you today,” Psaki told reporters. “I would note that the President paid a higher rate than most high income individuals and most corporations around the country.”
Since the S corporations are dormant, the IRS does not automatically review their use.
When questioned about the S corporations in 2019, the Biden campaign said, “As demonstrated by their effective federal tax rate in 2017 and 2018 — which exceeded 33% —the Bidens are committed to ensuring that all Americans pay their fair share.”
“There’s no reason for these to be in an S corp — none, other than to save on self-employment tax,” Tony Nitti, an accountant at RubinBrown LLP who reviewed the returns, told MarketWatch.
High-profile politicians have been previously scrutinized for using the technique often referred to as the “Gingrich-Edwards tax loophole,” named for former presidential candidates Newt Gingrich, a Republican, and John Edwards, a Democrat.
Former President Barack Obama attempted to put an end to the controversial tax loophole in his 2015 budget.
In 2005, the Treasury Department’s inspector general for tax administration said, “The S corporation form of ownership has become a multibillion dollar employment tax shelter for single-owner businesses.”
The White House did not immediately respond to a request for comment from the New York Post.