Sean Duffy, communications director for Colorado candidate for governor Scott McInnis, told the Colorado independent this week that, when McInnis said he might take a “beating” if he were to release his tax returns, he was not referring to scrutiny from the press or from Democratic opponents, but from his law firm partners at Hogan & Hartson. Duffy said the tax forms would reveal personal information about McInnis’s partners and that, because they weren’t running for office, it would be inappropriate to make their personal financial information public.
James Vander Laan, a certified public accountant, told the Colorado Independent, however, that individual-partners’ income is not listed on the K1 tax forms McInnis would use to report his income from the firm. McInnis’s K1 would only list his income. Vander Laan added that it’s true that an individual percentage of the entire partnership income is listed, so the total income of the firm could be calculated from the information provided on an individual partner’s K-1 form. In other words, McInnis would not be revealing what each of his partners were making but only how much Hogan & Hartson is making.
Presented with that information, Duffy confirmed in an email that in fact that was the reason McInnis didn’t want to release the returns. If that’s true, it means McInnis feared taking a beating from his partners merely for revealing the income of the firm.
Yet in a follow up interview, accountant Vander Laan said that McInnis could simply redact the information revealing the percentage of Hogan & Hartson income he earned, thereby making it impossible to determine the total income of the firm from McInnis’ K-1 form.
“Absolutely,” Vander Laan said. “It would be pretty easy to take a black Marks-A-Lot and cover it up, wouldn’t it?”
In fact, Vander Laan said that McInnis could document his partnership income without releasing his K-1 form at all.
“Actually that information goes on a schedule in your 1040 that’s called Schedule E. By the time it hits Schedule E, you can no longer see ownership percentage. That doesn’t appear on Schedule E.”