Yang, Adams to amend tax returns after questions about discrepancies

NEW YORK — Two leading New York City mayoral contenders, Andrew Yang and Eric Adams, failed to properly disclose income on recent tax returns and have said they will amend their filings to reflect the additional earnings.

Andrew Yang never reported nearly $14,500 he paid himself in 2019 from his presidential campaign account and, over the course of three years, Brooklyn Borough President Eric Adams left off any money he received from renting out part of the house he occupies, POLITICO found through reviewing the candidates’ returns.

The revelations come as the two compete in an eight-way Democratic primary to succeed Mayor Bill de Blasio next year. The winner will have to manage the city’s finances, balancing a projected $92 billion budget as residents and businesses pull themselves out of a fiscal slump.

When asked to explain the omissions, both candidates promised to update their tax filings with the Internal Revenue Service.

In 2019, Yang was pursuing a longshot bid for the White House and needed cash. He made a tax-free $40,000 withdrawal from a retirement account to supplement roughly $55,000 he earned from book royalties, investments and rent on a second home — income on which he paid no federal income taxes. His campaign said last week a child care deduction offset his earnings.

But his presidential campaign account on file with the Federal Election Commission shows Yang took a cut of about $14,500 in the final two months of 2019.

When asked why that money was left off his 26-page tax return, which his team provided to POLITICO upon request, spokesperson Jake Sporn said, “Andrew’s accountant is filing an amendment to his 2019 return. All taxes were withheld by the campaign and all FEC filings properly disclosed the payments.”

He said he does not anticipate Yang will owe any additional taxes, since income taxes were withheld from campaign paychecks at the time they were issued, though that determination will be made by the IRS.

Adams, who has been ranking second to Yang in recent polls, also declined to reveal the full picture of his earnings to the IRS, leaving any mention of rental income off his 2017, 2018 and 2019 tax returns provided to POLITICO.

The borough president lives in a multi-unit attached row house in the Bedford-Stuyvesant section of Brooklyn, and from 2017 through 2019, reported taking in up to $50,000 a year in rent on the property, according to financial disclosures on file with the city’s Conflicts of Interest Board.

But he made no mention of that to the IRS. His team initially provided a letter from his accountant, Clarence Harley, who wrote in February: “The income from the residential rental activity was offset by ordinary and necessary expenses, such as interest, property taxes, insurance, fuel consumption, depreciation, as well as other out-of-pocket expenses [that] generated a loss. … Accordingly, the real estate activity was not declared."

Several accountants disagreed with that reasoning.

“In my experience, anyone who has rental income or losses has to report it,” said Anil Melwani, a certified public accountant with Tanton Grubman.

Adams may have been shortchanging himself by omitting calculations on his returns — as a result, he would be unable to claim those losses if he were to sell his property.

“Most people incur losses and they are very eager to declare because it helps them most of the time,” Melwani said.

TurboTax rules designed for filers circumventing accountants reiterate those rules.

“If you earn rental income on a home or building you own, receive royalties or have income reported on a Schedule K-1 from a partnership or S corporation, then you must prepare a Schedule E with your tax return. You must report all income and losses from these activities on the Schedule E as well as your personal tax return,” the online tax preparer instructs.

Presented with this information, Adams’ team said he would change his filing.

“Eric’s taxes were prepared by his accountant, who will now update the filings to detail how costs exceeded income on the property as he made improvements while not increasing tenants’ rents over the past few years,” spokesperson Evan Thies said. “He was pleased to hear this might actually result in a tax savings for him.”

Adams spoke about his experience as a landlord during an appearance on Hot97 last year, during an interview in which he also shared that his accountant fell on hard times and was in a homeless shelter.

“I’m a landlord. I have a 3-family house in Bedford-Stuyvesant. I bought it when it wasn’t worth much. Now it’s worth over a million dollars,” Adams said. “I have three tenants — each one of those tenants there, when they moved in I had them sign a lease that stated as long as you’re in my building, I’ll never raise your rent. If there’s enough for me to pay my mortgage, there’s no reason for me to hit you over your head.”