Trump Files $10 Billion Lawsuit Against IRS Over Leaked Tax Returns

President Donald Trump signs an Executive Order at a Champion of Coal event in the East Room of the White House, Wednesday, February 11, 2026. Courtesy of Molly Riley.

On January 29, 2026, President Donald Trump filed a $10 billion lawsuit against the Internal Revenue Service (IRS) and the Treasury Department, creating an unprecedented legal situation where the sitting president is suing an agency within the Executive Branch of the Federal Government. The suit was filed by Trump, his sons Donald Trump Jr. and Eric Trump, and the Trump Organization. The Trump family is seeking damages for the unauthorized disclosure of the family’s confidential tax returns.

Between 2018 and 2020, an IRS contractor, Charles Littlejohn from the consulting firm Booz Allen Hamilton, illegally obtained and leaked Trump family tax returns to publications including the New York Times and ProPublica. Littlejohn pleaded guilty in October 2023 to one count of illegal disclosure and received a five-year prison sentence in January 2024, which he is currently appealing.

This lawsuit is another example of the flurry of litigation by Trump and his organization over the past year. This includes defamation suits against various news organizations, as well as his claims against financial institutions for alleged wrongdoing.

This case presents a complex constitutional scenario: Trump is the plaintiff and the defendant. This is because the president’s own appointees, including Attorney General Pam Bondi and Treasury Secretary Scott Bessent, would both be responsible for defending against his claims and negotiating any potential settlement funded by taxpayers. They would be playing both sides of the suit.

Legal experts from both sides of the political spectrum have their doubts about this arrangement. When questioned about the conflict of interest aboard Air Force One, Trump stated he would donate any and all settlement proceeds to charity. Senators Elizabeth Warren (D-MA) and Ron Wyden (D-OR) have questioned Trump’s motives behind such a large settlement value noting in a letter to Scott Bessent and Pam Bondi that “Congress designed the [Internal Revenue Code] to provide compensation for proven harm — not to confer $10 billion dollar windfalls to a President seeking to line his own pockets at taxpayer expense.”

Moreover, the lawsuit has prompted legislative responses from multiple members of Congress. Ron Wyden (D-OR) and Senate Minority Leader Chuck Schumer (D-NY) introduced the Stop Presidential Embezzlement Act, which would impose a 100% tax on any settlement or award received by a sitting president from the federal government, ensuring that the president cannot enrich himself from the outcome of this lawsuit. 

Even beyond the legislative response, watchdog organizations, Common Cause, and the Project on Government Oversight, along with four former federal officials, submitted an amicus brief asking the court to delay the case until Trump leaves office in January 2029. The brief argues that conflicts of interest raise questions about whether the Department of Justice can properly and effectively defend public funds while Trump is in office.

Legal analysts have identified several challenges in Trump’s case, including the timeline of his claim. The Statute of Limitations in Florida, where the case is being tried, requires claims to be filed within two years of discovery. Trump’s complaint argues this timeline began in January 2024 when the IRS formally notified him, though the leaked returns were published as early as September 2020. This would place his claim outside the Statute of Limitations. 

More than the circumstances of the suit, the timing of the lawsuit has also alarmed lawmakers. On January 26, 2026, just three days before Trump filed his suit, the Treasury Department halted operations with Booz Allen Hamilton and canceled $21 million in contracts. This move occurred more than five years after the initial breach and shortly before the suit was filed. Members of Congress have asked whether this decision was coordinated by the White House.

The lawsuit also comes at a critical point for the IRS. The 2026 filing season is in full swing, placing the IRS under intense stress and creating significant challenges. According to National Taxpayer Advocate Erin M. Collins, the agency is dealing with a 27% workforce reduction. Not only that, but a proposed congressional budget deal also includes approximately $1.1 billion in cuts to the IRS’s budget compared to 2025.

The judge presiding over the case is Judge Kathleen M. Williams of the U.S. District Court for the Southern District of Florida, who was appointed by Barack Obama in 2011. Given the unprecedented constitutional questions raised in this lawsuit, Judge Williams faces the challenge of maintaining judicial neutrality while weighing the interests of both Trump and the American taxpayers who would ultimately fund any settlement.

The severity of this case raises important questions about executive power and government accountability, two issues that dominate headlines today. This case directly engages the ongoing debate over whether a president can properly sue agencies under their direct executive control. 

Furthermore, this case raises questions about whether taxpayers should fund damages for actions that occurred during a previous administration, as well as the quality of security surrounding the use of public funds.

Over the next few months, the American public will watch as Judge Williams navigates these unprecedented constitutional questions while balancing the interests of all parties, especially American taxpayers, who would ultimately pay for any settlement.