Stormy Daniels’s Silence Isn’t Tax-Free

Something unpleasant lurked inside the $130,000 that Donald Trump’s lawyer Michael Cohen paid to Stormy Daniels in 2016: a tax bill. Daniels—whose real name is Stephanie Clifford—would have been obligated to pay as much as $51,480 of that hush money to the IRS. That’s assuming she filed jointly with her husband, also a porn actor, and that they made enough to be in the top bracket. The settlement was “definitely taxable to Stormy, unless she had alleged actual physical injury, which she did not,” says Ruth Wimer, a Washington lawyer and accountant. On her tax return, Daniels would have been asked to identify the reason for the hush money, but she could have declined to provide details if doing so would have exposed her to liability.

It’s not just Daniels. Karen McDougal, the ex-Playboy Playmate who alleges an affair with Trump, would have owed taxes on the $150,000 paid to her by American Media Inc., owner of the National Enquirer. Payments with nondisclosure agreements are “very common” in civil lawsuits and litigation, says Ron Burdge, a consumer lawyer in Dayton. How common? “It’s hush money, so no one knows.”