It’s one of the first rules of accounting: Don’t talk about your personal clients.
Accountants and an attorney who represents accounting firms on Monday questioned the decision of a former accountant for Donald Trump to talk to The New York Times for a story that recounted how Trump had claimed a $916 million loss that could have allowed him to legally avoid paying federal income taxes for up to 18 years.
The Times said the 1995 tax returns that served as the basis for the story were mailed anonymously to them but that Trump’s former accountant, who was “initially reluctant to talk,” had confirmed their authenticity after meeting with a reporter in a South Florida bagel shop. The newspaper noted the semi-retired accountant also “readily explained an obvious anomaly in the way especially large numbers appeared on the New York tax document.”
IRS regulations, professional guidelines and ethic policies in nearly every case require tax preparers to obtain taxpayers’ permission before disclosing information for any reason other than preparing or filing returns. Exceptions are made for court orders or subpoenas.
“You kind of say to yourself when you hear (an accountant) breached client confidentiality, ‘What were they thinking?’ ” Debra Cutler, a former chair of the New York State Society of Certified Public Accountants’ professional ethics committee, said of Trump’s former accountant. “Whether it’s a client or a former client, unless you get their permission you are potentially opening yourself to exposure.”
She said client confidentiality was “something that is core to us,” and was taught in initial courses and later reaffirmed during periodic ethics training.
“It’s one of the hallmarks in our profession,” she said.
The Trump campaign did not respond to a question about whether it had given approval to the accountant, Jack Mitnick, 80, who now lives in Florida.
The Times reported that a Trump attorney, Marc E. Kasowitz, emailed a letter that contends that printing the records would be illegal because Trump had not authorized their disclosure. Kasowitz also threatened “prompt initiation of appropriate legal action.”
In an appearance in Colorado on Monday, Trump referred to the documents as “an alleged tax filing from the 1990s,” and said he had “legally used the federal tax laws” to his benefit and felt obligated “to pay as little tax as legally possible.”
In Trump’s 1987 book, “The Art of the Deal,” he quoted Mitnick advising him on how the 1986 Tax Reform Act would legally reduce his taxes.
“Jack Mitnick, my accountant, calls to discuss the tax implications of a deal we’re doing. I ask him how bad he thinks the new federal tax law is going to be for real estate, since it eliminates a lot of current real-estate write-offs,” Trump and co-author Tony Schwartz wrote.
“Mitnick tells me he thinks the law is an overall plus for me, since much of my cash flow comes from casinos and condominiums and the top tax rate on earned income is being dropped from 50 percent to 32 percent. However — I still think the law will be a disaster for the country, since it eliminated the incentives to invest and build particularly in secondary locations, where no building will occur unless there are incentives.”
In a telephone interview Monday, Mitnick did not say whether he had Trump’s consent to talk to the Times about Trump’s tax return. Asked whether he thought he had the right to talk about the return, he said it was “quite apparent that I didn’t think it was a problem having that conversation.”
Some accounting firms won’t even divulge that their clients are their clients, said Gene Bell, a Bellingham, Washington, tax specialist. That includes his firm.
“If a banker calls and says, ‘I have Mr. Smith applying for a mortgage and we need his tax returns,’ we don’t acknowledge he is a client of ours, but say, ‘Have Mr. Smith give us a call,’ ” Bell said. “Due diligence and confidentiality is a requirement and also a good business practice.”
Bell, who spoke after he was referred by the National Society of Accountants, added, “From a conservative standpoint, keeping your mouth shut is probably the better part of valor in a situation like this.”
The confidentiality of state tax returns is governed legally by state laws or regulations. The three returns mailed anonymously to the Times were state forms filed with Connecticut, New Jersey and New York.
The confidentiality of federal tax returns is governed by IRS rules and regulations. No federal return was included.
Beyond government regulations, the American Institute of Certified Public Accountants’ code of conduct calls for confidentiality, said Tom Manisero, a New York attorney who represents accounting firms.
“There are provisions that make it unlawful for tax preparers to share information without client consent,” he said. “This probably wasn’t the wisest thing on his part to do.”
Manisero noted that the returns are two decades old but said there were confidentiality requirements at the time “that were not materially different.”