Some thoughts on whether we can see any evidence of tax evasion -- a felony -- in @nytimes description of the #TrumpTaxReturns. In general, it is hard to spot evasion from just a return, and often difficult even if you can also see the "work papers," or supporting documents. /1

But there are red flags one looks for, and you can see some of them in the president's taxes. I prosecuted at least 2 cases, one of them that went to the Supreme Court, where a small-business owner used his family business as a checking account. /2

It's legal to spend your business's money, of course, if you own that business. But when you do so, you have to report that money as taxable income (or, for partnerships like Trump's, give up your "basis" or right to claim deductions from the business in the future). /3

Often, tax-evading business owners will have the business buy things for them directly -- trips on private jets, home "office" renovations, fancy hair cuts, say -- and list those items as business expenses on the business's books. This produces a double tax benefit. /4

First, it allows owner to pretend that they haven't just pulled money out of their business for their own use -- which, again, should be taxable. Second, it also allows owner to claim deductions to reduce taxable business profits. /5

Aside for tax wonks: It actually turns out that for partnerships, double-dipping in this way often doesn't save money (b/c the partnership isn't taxed separately from its owners), but the partners still seem to love to zero out p'ship income. /6

So this is to say that when we see extensive deductions for what look like personal use, we're seeing behavior that is typical of the tax evasion one sees in family-owned businesses. But sometimes the expenses turn out to be legit. /7

To be sure, you audit the taxpayer and give them a fair chance to show that, say, the private jet flights were really business-related, or that they actually did report them as income. IRS's problem is that this takes a lot of time & expertise. /8

And business owners know it - that's one reason you build a chain of 80+ cos, as POTUS has. Tax experts think that self-employed taxpayers pay only about 50% of the taxes they owe. Investing in IRS capacity to audit complex businesses is usually a money-making proposition. /9

Anyway, as @kirkstark points out, there are some items reported that sound as though they would be hard to defend on audit, such as $75k in hair cuts (which the Tax Court has called "inherently personal," i.e., not deductible). But still a few steps from there to tax evasion /10

Is this the most important thing we learned yesterday? Probably not. The President owing $400m in debts to unknown persons or powers worries me more. But the chief law enforcement official should respect the law. /fin (11 of 11)