Trump Sued the IRS for $10 Billion in Taxpayer Funds Over Leaked Tax Returns
President Trump filed a $10 billion lawsuit against the IRS and Treasury Department—agencies he directly oversees—creating an unprecedented conflict of interest in which he effectively negotiates with himself over a payout from the public treasury. Legal experts identify multiple strong grounds on which the case may fail, but the risk of a collusive settlement engineered within the executive branch, rather than resolved through genuine adversarial litigation, is real and has no historical precedent.
Details
On January 29, 2026, President Donald Trump, along with the Trump Organization and his sons Donald Trump Jr. and Eric Trump, filed a lawsuit against the Internal Revenue Service (IRS) and the U.S. Treasury Department seeking $10 billion or more in damages. The suit alleges the government failed to protect his and his family's confidential tax information, which was improperly disclosed during his first term.
Background: The Littlejohn Leak
The lawsuit stems from the actions of Charles "Chaz" Littlejohn, a contractor employed through Booz Allen Hamilton who was re-hired by the IRS in 2017. Littlejohn illegally accessed and disclosed thousands of confidential tax returns—including Trump's—to media outlets. The New York Times published a series in 2020 revealing that Trump paid no federal income taxes in 10 of the 15 preceding years, and as little as $750 in others due to reported losses exceeding gains. ProPublica also published stories highlighting inconsistencies in the returns.
Littlejohn pleaded guilty and in 2024 was sentenced to five years in federal prison for the unauthorized disclosures—a crime that affected Trump and thousands of other wealthy individuals.
The $10 Billion Figure
Trump's legal team arrived at the $10 billion figure by arguing that each media reference to his leaked tax returns constituted a separate unauthorized disclosure. Tax law experts dispute this interpretation, noting that damages under the relevant statute are calculated based on unauthorized disclosures by a government actor, not media re-publication. Alternatively, Trump's lawyers argue he suffered at least $10 billion in "actual damages"—a claim critics find difficult to sustain given that Trump was re-elected president in 2024 and his net worth has grown substantially, estimated at $7–10 billion.
For scale, CREW noted the claimed amount represents approximately two-thirds of the IRS's entire annual budget for FY2026. Treasury Secretary Scott Bessent confirmed any payout would come from the Treasury General Account—funded entirely by taxpayers.
Trump has said he would donate any winnings to charity. CREW noted that even a donated settlement would yield a personal tax deduction benefit for Trump.
Legal Challenges
Multiple legal experts and watchdog groups have raised substantial concerns about the case's viability:
Statute of Limitations: The Internal Revenue Code imposes a two-year limit on unauthorized disclosure claims, measured from discovery. Trump's lawsuit claims he did not discover the violations until January 29, 2024—but critics point out he was publicly posting about his tax returns being "illegally obtained" as far back as 2020, when the Times series ran. Tax law experts broadly agree the case faces a strong statute-of-limitations challenge.
Contractor vs. Government Employee: The disclosure was made by Littlejohn, an outside contractor, not a direct government employee. Courts have historically required a clear waiver of sovereign immunity to pursue the United States for a contractor's actions, and prior similar cases have been dismissed on those grounds. As one tax attorney stated: "Littlejohn is not an employee. He's got to go after Booz Allen."
Conflict of Interest: Trump filed suit against agencies he directly oversees. Treasury Secretary Bessent, who would administer any payout, serves at Trump's direction. Attorney General Pam Bondi has publicly stated the DOJ "works at the directive of Donald Trump." Trump himself has acknowledged the problem, telling reporters: "I'm supposed to work out a settlement with myself."
Watchdog and Congressional Response
On February 5, 2026, the watchdog group Democracy Forward filed an amicus brief urging the court to apply heightened scrutiny, warning of "collusive litigation tactics" given the president's control of both sides. On February 12, CREW and Public Citizen filed a separate amicus brief asking the U.S. District Court for the Southern District of Florida to stay the case and block any settlement while Trump remains in office, citing separation of powers concerns and an "insurmountable conflict of interest."
In Congress, Senators Ron Wyden (D-OR) and Elizabeth Warren (D-MA) wrote to Treasury demanding answers about whether the department was coordinating with the White House. They also noted that the underlying leak occurred between 2019 and 2020—during Trump's own first term—under his hand-picked IRS and Treasury leadership. House Democrats introduced the Prevent Presidential Profiteering Act (H.R. 7381) on February 2, which would bar sitting presidents from profiting from lawsuits against the U.S. government.
Settlement Talks (April 2026)
On April 17, 2026, Trump's lawyers filed a motion in Florida district court seeking a 90-day pause to pursue a negotiated resolution—filed with the consent of DOJ lawyers representing the IRS and Treasury. Any final agreement would require court approval.
Yale Law professor Keith Whittington told The Atlantic that courts may become "pretty nervous about a situation in which, arguably, you've got the same person on both sides of the case." He also noted that under Trump's expansive theory of executive power, the president could potentially issue direct instructions to the government lawyers nominally defending against his own claim.
Broader Pattern
This lawsuit is not an isolated case. Trump previously secured $16 million each in settlements from media companies Paramount and ABC, and nearly $60 million total from Meta, Alphabet, and X. He also reportedly sought $230 million from his own DOJ as compensation for the classified documents investigation and the Russia probe, though no formal lawsuit was filed in those cases.
Unlike those media settlements, the IRS case would mark the first time in U.S. history that a sitting president extracted taxpayer money from a government agency he controls through litigation, according to legal experts cited by The Atlantic. As Yale's Whittington observed, "One might characterize that as a question of norms, but I doubt it even occurred to anyone to think about whether or not this is an appropriate thing to do."