- The Supreme Court said it would hear three cases regarding the president's financial records in 2020, with arguments scheduled for March.
- Two of the cases concern subpoenas issued by House Democrats who are seeking financial data from Mazars LLP and Deutsche Bank. The third centers on an investigation by Manhattan District Attorney Cyrus Vance Jr.
- A tax return may not tell you everything about someone's finances, but it sheds light on the sources of income.
The Supreme Court will determine next year whether investigators may finally get a glimpse at President Donald Trump's tax returns.
One case focuses on an investigation by Manhattan District Attorney Cyrus Vance Jr. The DA is looking into the Trump Organization and has served a subpoena seeking eight years of tax returns.
While a tax return won't tell you everything about any one filer's finances on its own, when combined with other documents including a statement of net worth, it can provide a more complete picture of that person's bottom line.
"What you can see from the individual Form 1040 are the types and sources of income, including whether the taxpayer has capital gains or dividend income," said Joshua D. Blank, professor of law at the University of California, Irvine.
"What you can't see is wealth," he said. "We tax people based on annual income and not total wealth."
The first two pages of a Form 1040 are a summary of taxable income a filer is required to report.
The attached schedules are what can shed light on the sources of that income and the deductions a taxpayer claims.
Deductions reduce taxable income based on your federal income tax bracket.
Schedule A is the document taxpayers must fill out to calculate their itemized deductions, including any deductible medical expenses and state and local taxes paid.
Take note: Starting in the 2018 tax year, the deduction for state and local taxes paid was capped at $10,000 for individual filers, so there's a limit to the extent Trump — or anyone with a personal residence in a high-tax state like New York — could write off those property and income taxes.
Keep a close eye on the "gifts to charity" portion of Schedule A. Donations that are more than $500 must be spelled out on Form 8283, the noncash charitable contribution form.
Taxpayers must describe the donated property and provide a summary of its appraised fair market value, including art, real estate and cars.
Whether your real estate empire is racking up losses or you're getting income through a web of pass-through entities, Schedule E will have the details on residential, vacation and commercial property.
Line 3 spells out rents received.
"You can get an idea of business income, as you'd see that coming in through companies and pass-through entities, partnerships and LLCs," said Jeffrey Levine, CPA and CEO of BluePrint Wealth Alliance.
Keep a close eye on depreciation, which you can find on line 18. Depreciation is a tax deduction you can take each year to recover the cost of your real estate as you use it.
While Schedule E might share the name of a pass-through entity that's providing income to the taxpayer, it may be difficult to learn the details of who ultimately owns it, said Christy Bastian, CPA and president of FVL Consultants.
"You can sometimes follow through and trace entities," Bastian said. "You're looking for clues, but it doesn't mean that every return will have it."
Similarly, members of a partnership aren't always easy to identify, Blank said.
Taxpayers who are running a side hustle or operating as a sole proprietor from home are responsible for reporting the income.
Form 1040 no longer breaks out gains or losses related to businesses, so you'll have to find Schedule C to collect the data.
This form spells out the income or loss from that small business. It also details the expenses related to running that enterprise.
You can get an idea of whether an entrepreneur claimed the new qualified business income deduction — a potential 20% tax break that went into effect in 2018.
This new break allows owners of "pass-through" entities, including S-corporations, partnerships and sole proprietorships, to deduct up to 20% of their qualified business income.
Business owners in any industry may take the 20% deduction if they have taxable income that's under $160,700 if single or $321,400 if married and filing jointly in 2019.
The IRS applies limitations over those thresholds.
For starters, taxpayers in a "specified service trade or business," including doctors, lawyers and accountants, can't take the deduction at all if their taxable income exceeds $210,700 if single or $421,400 if married.
The rules are a little different for business owners who aren't in a "specified service trade or business."
In that case, you get a reduced deduction if your taxable income exceeds the $160,700/$321,400 threshold but is still under the $210,700/$421,400 threshold.
If your business isn't in a specified service trade or business, and your taxable income exceeds the $210,700/$421,400 threshold, then your deduction is generally capped as a percentage of W-2 wages paid to your employees.
Bottom line: Nonspecified service trades or businesses Trump owns may be eligible for this deduction, depending on the amount of wages paid and depreciable property held by those businesses, said Levine.
Whether you're tracking down someone's interest received from a bank account or ordinary dividends paid, you'll need to find Schedule B.
On this form, you'll see where some of these interest- and dividend-paying investments are held, but you won't get any details on what exactly the taxpayer has invested in.
What if you sold an asset? Schedule D will tell you more about the gains and losses stemming from the sale.
Filers would fill out Form 8949, and make note of their purchase and sales dates, as well as the cost basis, to correctly fill out this schedule. It can act as a window into the taxpayer's trading activity.
"You can see if there are a lot of stock transactions," said Bastian.