Trump Verdict Highlights Tax Dangers of Fringe Benefits

By February 7, 2023 No Comments
Trump Veredict IAE

Trump Verdict Highlights Tax Dangers of Fringe Benefits


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The verdict against former President Donald Trump’s companies hinged on the often confusing – and often fudged – taxability of fringe benefits.

A jury in New York recently found two Trump Organization companies guilty on multiple charges of criminal tax fraud and falsifying business records. The case was in connection with a longtime scheme to fail to report and pay taxes on compensation for top executives.


(The verdict involved Trump Organization’s Trump Corp. and Trump Payroll Corp. units. Neither former President Donald Trump nor his family were charged in the case, but he was mentioned repeatedly during the trial by prosecutors.)

Over more than a decade, according to evidence, Trump executives often disguised holiday bonuses as consulting fees and at one point Trump paid for the private school tuition of Trump Organization CFO Allen Weisselberg’s grandchildren. Other fringe benefits cited included company-funded apartments, luxury cars and personal expenses.

Prosecutors held that Trump sanctioned tax fraud and refuted the defense’s argument that Weisselberg, who earlier pleaded guilty to several felony charges, was just a rogue employee acting out of personal greed. They also said that paying bonuses to Trump Organization executives through 1099 checks (meant for independent contractors) dates back decades.

Trump’s company reportedly faces fines of up to $1.6 million or more when sentenced in January.


The case paints a clear picture of how much tax trouble expensive fringe benefits can ignite in the United States.


How taxable are they?

The American IRS is actually strict and clear: A fringe benefit is a form of pay for the performance of services (though the worker in question does not have to be your employee). You’re considered the provider of a fringe benefit for tax purposes even if a third party, such as your client or customer, provides the benefit.

Any fringe benefit you provide is taxable and must be included in the recipient’s pay unless the law specifically excludes it. 




You must include in a recipient’s pay the amount by which the value of a fringe benefit is more than the sum of: any amount legally excluded from pay; any amount the recipient paid for the benefit. You use the general valuation rule to determine the value of most fringe benefits, aka its fair market value.

If the recipient of a taxable fringe benefit is your employee, the benefit is generally subject to employment taxes, but you can use special rules to withhold, deposit and report the employment taxes.

.There is a dependent care assistance program under IRC Code Section 129 that would exclude the payments from employee wages, but there are many requirements to this exclusion.


Your tax specialist needs to be able to handle these and many other potential landmine issues of wealth, foreign income and tax enforcement. If we can help, please let us know.


About the Author 

Alicea Castellanos is the CEO and Founder of Global Taxes LLC. Alicea provides personalized U.S. tax advisory and compliance services to high net worth families and their advisors. Alicea has more than 17 years of experience. Prior to forming Global Taxes, Alicea founded and oversaw operations at a boutique tax firm, worked at a prestigious global law firm and CPA firm. Alicea specializes in U.S. tax planning and compliance for non-U.S. families with global wealth and asset protection structures which include non-U.S. trusts, estates and foundations that have a U.S. connection.

Alicea also specializes in foreign investment in U.S. real estate property, and other U.S. assets, pre-immigration tax planning, U.S. expatriation matters, U.S. persons in receipt of foreign gifts and inheritances, foreign accounts and assets compliance, offshore voluntary disclosures/tax amnesties, FATCA registration, and foreign companies wanting to do business in the U.S. Alicea is fluent in Spanish and has a working knowledge of Portuguese.

Alicea is an active member of the Society of Trusts & Estates Practitioners (STEP), the New York State Society of Certified Public Accountants (NYSSCPAs), the American Institute of Certified Public Accountants (AICPA), the International Fiscal Association (IFA), a member of Clarkson Hyde Global, a world-wide association of accountants, auditors, tax specialists and business advisors and the International Advisory Experts (IAE).

Distinctly, in 2020, Alicea was awarded with a prestigious NYSSCPA Forty Under 40 Award. She was selected as someone that has notable skills and is visibly making a difference in the accounting profession. Alicea has also been recognized as a leading expert for Tax advice and she has been invited to join Advisory Excellence, as their exclusively recommended tax expert in the USA.

In 2021 and 2022, Alicea was the Gold and Silver Winner, respectively, of Citywealth’s Powerwomen Awards in the category USA – Woman of the Year – Business Growth (Boutique). Furthermore, Alicea is currently listed in the Global Elite Directory 2022, which is an annual exclusive directory of the world’s elite lawyers and outstanding wealth advisors advising ultra-high net-worth clients.

Please note: This content is intended for informational purposes only and is not a replacement for professional accounting or tax preparatory services. Consult your own accounting, tax, and legal professionals for advice related to your individual situation. Any copy or reproduction of our presentation is expressly prohibited. Any names or situations have been made up for illustrative purposes — any similarities found in real life are purely coincidental.