Recent national headlines describing a Justice Department arrangement that allegedly shields a sitting president, his family, and his businesses from future IRS examinations have understandably left ordinary taxpayers asking a fair question: What protections do I have when the IRS comes knocking?

At DeFreitas & Minsky LLP, CPA, we’ve spent more than seven decades guiding New York individuals, families, and closely held businesses through IRS audits, appeals, and collection matters. This article is not about politics. It’s about translating a high-profile story into practical information for the people we actually serve: working New Yorkers who do not have a $1.8 billion fund or an Acting Attorney General on speed dial.

What Happened

According to reports published in May 2026, the U.S. Department of Justice reached a settlement resolving a lawsuit the President had brought against the Treasury and the IRS. As part of that agreement, a one-page order allegedly bars the IRS from conducting future examinations of the President, members of his family, related individuals, trusts, and affiliated businesses. Press accounts indicate the order was signed by the Acting Attorney General and posted on the DOJ website.

The broader settlement reportedly establishes a fund of approximately $1.8 billion to compensate individuals who claim they were targeted by what the administration describes as politically motivated enforcement during the prior administration. Separately, an IRS examination disclosed in 2024 — involving alleged double-deduction of losses on a Chicago real estate project — could have resulted in a tax liability of more than $100 million, plus interest and penalties, according to tax specialists quoted in earlier reporting. It is unclear from public reporting whether that audit has formally concluded.

None of these allegations have been adjudicated, and the legality of the DOJ order may be tested in court. From a tax-practice standpoint, the story is significant because it highlights how IRS audits actually work — and how very differently they tend to unfold for taxpayers without political leverage.

Who May Be Affected

The more useful question for most readers is who is not shielded. That answer is straightforward: virtually everyone else.

• Individual New York taxpayers filing Form 1040, including high-earners, retirees with complex investment income, and self-employed professionals.
• Small business owners operating as S-corporations, partnerships, or single-member LLCs, particularly those claiming significant deductions, losses, or credits.
• Real estate investors using depreciation, cost-segregation studies, like-kind exchanges, or pass-through losses.
• Estates and trusts, which face IRS scrutiny on valuation, basis, and distribution issues.
• Cross-border filers with foreign accounts (FBAR/FATCA), inbound or outbound investments, or expatriation issues.

If you fall into any of these categories and receive an IRS examination notice, you have rights — and you have options.

Tax Issues That Commonly Trigger an Audit

While the specific allegations in the news story involve claimed losses on a commercial property, the underlying issue — whether a taxpayer may have deducted the same economic loss more than once — comes up in many ordinary contexts. Common audit triggers include:

• Worthlessness deductions on investments or partnership interests, where timing and substantiation are critical.
• Basis tracking errors when property is contributed to or distributed from partnerships, S-corps, or trusts.
• Related-party transactions, including transfers between entities controlled by the same family.
• Passive activity losses and real-estate professional status claims under IRC §469.
• Hobby loss issues under IRC §183 for activities that consistently report losses.
• Unreported income flagged by 1099 matching, third-party payment processors, or cryptocurrency exchanges.
• Large charitable contribution deductions, especially non-cash gifts requiring qualified appraisals.

Each of these may be defensible — but only if the taxpayer maintained the documentation the Internal Revenue Code and Treasury Regulations require.

What an IRS Audit Can Cost You

Unlike the headline figure of $100 million, most New York audits involve much smaller numbers — but the personal impact can be severe. Potential exposure may include:

• Additional tax for the years under examination (typically the prior three years, extended to six years for substantial omissions and indefinitely for fraud or unfiled returns).
• Accuracy-related penalties of 20% under IRC §6662 for negligence or substantial understatement.
• Civil fraud penalties of 75% under IRC §6663, where the IRS alleges intentional wrongdoing.
• Interest that compounds daily from the original due date of the return.
• New York State follow-on assessments, because the Department of Taxation and Finance routinely conforms to federal adjustments and may issue its own bill.
• Information-return penalties for missed FBAR, Form 5471, Form 3520, or Form 8938 filings, which can dwarf the underlying tax.

For New York residents, the state piggyback effect is often overlooked. A federal adjustment can quietly trigger a state notice months or years later.

Evidence and Documentation That Strengthen an Audit Defense

Good audit outcomes are built on contemporaneous records. If you are facing — or anticipating — an IRS examination, the following typically matter most:

• Original source documents: bank and brokerage statements, settlement statements (HUD-1/Closing Disclosure), invoices, receipts, and canceled checks.
• Books and records reconciled to the filed return, including general ledger detail and trial balances.
• Engagement letters and prior CPA workpapers showing how positions were originally analyzed.
• Qualified appraisals for non-cash charitable contributions and estate filings.
• Mileage logs, time logs, and calendars for business-use and material-participation claims.
• Entity governance documents: partnership agreements, operating agreements, K-1s, and basis schedules.
• Correspondence with prior preparers establishing reasonable reliance for penalty defense.

If records are missing, all is not lost — the Cohan rule and reasonable reconstruction techniques may help, but they require careful, professional handling.

What to Do Next

If you receive an IRS notice — whether it’s a CP2000 matching letter, a Letter 2205 opening an examination, or a 30-day or 90-day letter — please consider these conservative steps:

1. Do not ignore it. Deadlines in IRS letters are real, and missing a 90-day Notice of Deficiency forfeits your right to petition the U.S. Tax Court before paying.
2. Do not call the agent without preparation. Casual statements can narrow your defenses.
3. Gather your records for the years in question, but do not volunteer documents outside the scope of the notice.
4. Engage a credentialed representative — a CPA, enrolled agent, or tax attorney — and execute Form 2848 so they can speak with the IRS on your behalf.
5. Preserve electronic data including QuickBooks files, emails, and cloud-stored receipts.
6. Watch the New York calendar. State assessments triggered by federal adjustments carry their own response deadlines.

If you or a family member has received an IRS examination notice — or is worried that a past return may not stand up to scrutiny — Talk to DeFreitas & Minsky for 70+ years of trusted CPA guidance – free consultation. You can reach our team through dmaccountingfirm.com.

Frequently Asked Questions

Can the IRS still audit me if I’m an ordinary New York taxpayer?

Yes. The reported DOJ arrangement allegedly applies to a very narrow set of individuals and entities, and it does not change the IRS’s authority to examine other taxpayers. New York residents remain subject to the standard federal audit rules, as well as separate review by the New York State Department of Taxation and Finance.

How far back can the IRS go in an audit?

Generally three years from the date a return was filed, extended to six years where the IRS alleges that more than 25% of gross income was omitted. There is no statute of limitations for unfiled returns or where civil fraud is alleged, so it is critical to address gaps promptly.

What should I do the moment I receive an IRS letter?

Read it carefully, note every deadline, and avoid responding off the cuff. Then contact a qualified CPA or tax attorney before providing any documents or making any statements, because early choices may shape the entire examination.

Can I be charged penalties even if I relied on my tax preparer?

Possibly, but reasonable reliance on a competent professional may support a defense to accuracy-related penalties under IRC §6664. Documentation of what you disclosed to your preparer, and the advice you received, is essential to that defense.

Does a federal audit automatically trigger a New York State audit?

Not automatically, but New York routinely receives federal audit results through information-sharing agreements and frequently issues conforming assessments. Taxpayers are also required to report federal changes to New York within a set period, and failing to do so may create additional exposure.

What if I can’t pay the tax the IRS says I owe?

You may be eligible for an installment agreement, an offer in compromise, or currently-not-collectible status, depending on your financial circumstances. A representative can help you evaluate which path minimizes interest, penalties, and disruption to your life.

Is it true the President is now shielded from audits forever?

According to reports, a one-page DOJ order allegedly bars future IRS examinations of the President, his family, and affiliated entities, but the order’s legality has not been tested in court. It is a specific, narrow document and does not change the audit rules that apply to other taxpayers.

Should I hire a CPA or a tax attorney for an IRS audit?

Many audits are handled effectively by a CPA or enrolled agent, particularly where the issues are documentation-driven. If the IRS raises civil fraud allegations or criminal exposure, coordination with a tax attorney is appropriate — and a firm experienced in both worlds can help you decide.

Original reporting: dailymail.com.