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Geithner's Taxes

As much as Mr. Obama and his team may wish it, however, the disclosures cannot be dismissed so easily, or papered over. The just-the-facts report of Mr. Geithnerís tax transgressions, compiled and released by the Senate Finance Committee, paints a picture of noncompliance that is considerably more disturbing than his supporters are acknowledging.

. . . According to the report, when Mr. Geithnerís tax returns for 2003 and 2004 were audited by the I.R.S. in 2006, the auditors found that he had failed to pay self-employment tax in those years. To make good, he paid the back taxes, plus interest ó $16,732. . . . [T]he Finance Committee found that Mr. Geithner had signed paperwork at the I.M.F. that acknowledged his self-employment tax obligation.

The story does not stop there. Mr. Geithner also failed to pay the self-employment tax in 2001 and 2002. Those returns, which the report says Mr. Geithner prepared himself, were not audited and so the I.R.S. did not order him to pay up ó which raises the question of why he did not voluntarily amend those returns and pay the taxes and interest at the time of the 2006 audit. Instead, he waited until after vetting by the Obama team late last year revealed the shortfall ó $19,176 in taxes and $6,794 in interest.

A similar lapse occurred on another tax issue. On returns for 2001, 2004 and 2005, Mr. Geithner wrongly claimed expenses for sleep-away camps in calculating his dependent care tax credit. The accountant who prepared his 2006 return informed him that payments to overnight camps were not allowable expenses, but again, he did not file amended returns for the previous years at that time. The report does not break out the taxes and interest on that item alone, but along with other adjustments, Mr. Geithner owed an additional tax of $4,334 and interest of $1,232. . . .

Sounds like Geithner was either not very careful or was basically trying to get away with it. Personally, it's not something I care about much but I can see where some folks might think this matters.

Speaking for me only

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    Maybe he's better suited (5.00 / 2) (#1)
    by Fabian on Thu Jan 15, 2009 at 07:51:23 AM EST
    to private employers who practice DADT.

    I don't expect everyone in the government to be completely clean and blameless, but I prefer not to have Alberto Gonzales flashbacks either.

    No real excuse for this (5.00 / 2) (#5)
    by ricosuave on Thu Jan 15, 2009 at 08:10:33 AM EST
    I don't know whether it should derail his nomination (though it looks like it has--they delayed the hearings), but there is no "oops" excuse for this.  It is almost impossible to miss this obligation on the tax forms when you do it yourself, and it is impossible to miss it when you use TurboTax.  And there is really no way to say you were unaware of two years of obligations after the IRS told you about the other years. But what do I know about taxes and finance...it's not like I work at the World Bank or something...

    I would probably not go back and recalculate my taxes for previous years just to have the honor of paying an additional $20K.  But I wouldn't be able to honestly say in my confirmation hearings that I didn't know I owed it.  

    And therein lies his real problem for confirmation.  He has to go in and admit he wilfully avoided taxes, which gives the Republicans a figleaf reason to vote against him, will give fraidy-cat democrats a reason for pause in their votes, and will potentially hurt the look of bipartisanship that the O's want to achieve in their confirmations.

    I say 60% chance he decides he would rather spend more time with his family in the next few days.

    There is no way on God's green earth (5.00 / 5) (#8)
    by Anne on Thu Jan 15, 2009 at 08:23:31 AM EST
    that when Geithner was in the middle of that audit, he did not, with the panic and dread that only the IRS can inspire, take a look at the 2001 and 2002 returns and understand that he had not paid the self-employment taxes.  No way.  And if he was using tax software to do those returns, he would have had to override the program to delete the self-employment tax the program would have automatically generated when he entered his information.

    So, now we know he's got some big cojones, but it would be nice if we could find someone who would use them for good - the greater good, that is - would that be too much to ask?  

    If the Senators are doing their jobs, they will ask the pointed questions, not back down until they are answered, and maybe we'll get some insight on Geithner's vision and philosophy.  At a minimum, I want to hear a commitment to accountability for and strenuous oversight of the TARP money.

    Parent

    He certainly does seem to have big (5.00 / 1) (#20)
    by Inspector Gadget on Thu Jan 15, 2009 at 11:09:29 AM EST
    "cojones", and, considering the agency he was knowingly messing with, I seriously doubt he felt the "panic and dread that only the IRS can inspire".  That power they wield isn't for people like Geithner, and he knows it. He's going to be the Treasury Secretary, for goodness sake.

    Had any of us done this and gotten caught, we would have paid penalties in addition to interest. (His interest seemed so low. I always thought the rate was something horrific like 20%.) Maybe even some jail time since it was so obviously intended to go unpaid.

    I work with people who have the IRS on their tail. They can't own anything, they can't even have a bank account. Some are afraid to have a job. None of them can say "I R S" without turning pale.


    Parent

    IRS variable interest rates. (none / 0) (#40)
    by wurman on Thu Jan 15, 2009 at 06:34:51 PM EST
    You may have in mind the "failure to file" penalty rate (5% monthly, max 25%) & the "failure to pay" penalty rate (5% monthly forever until paid).

    The actual interest rate on unpaid balances is, per About.com:

    Interest is calculated based on how much tax you owe. Interest rates change every three months. Currently, the IRS interest rate for underpayment of tax is 5% per year. The interest is calculated for each day your balance due is not paid in full.
    IRS interest rates are variable and are set quarterly. For historical IRS interest rates, see this chart at TaxAlmanac.org.


    Parent
    Rico -- (5.00 / 1) (#10)
    by blogname on Thu Jan 15, 2009 at 08:24:05 AM EST
    Nice screen name. I do not doubt that he knew about the obligation.  I just don't think that should "taint" him so that he cannot serve. We are setting standards that only a handful of nuns can meet. One thing though: I wonder how Bill Richardson feels about this one.....

    Parent
    Where is the taint or somesuch (5.00 / 1) (#27)
    by christinep on Thu Jan 15, 2009 at 02:42:16 PM EST
    Whether it is "taint" or a sheer effront that stems from reckless disregard or selfish regard, I believe that the center of G's problem has to do with the two-class concept. The more we look like Republicans here, the more likely that we will also develop an early credibility problem. I know that for many of us--certainly speaking for me and my husband--we look intently at issues of civil liberties, civil rights, war/peace and, other than the present and looming mega-economic mess, we may tend to downplay those intricate tax and financial issues. (E.g., I have never understood why Repubs really get so riled over the "Death" tax--known to many of us as the estate tax. To me, it shows a lack of social obligation to focus so much on that limited tax issue.) Yet, this G matter really has a message for many about "the little guys pay, the big guys don't." To appear to reward publicly a person who mistakenly or willfully avoids societal tax obligations may send a message of "the more things change the more they stay the same" to a lot of struggling families, to a lot of the middle class. (Side note: My husband thinks that my laser focus on this issue may be a bit strong. But, I think that when jokes start appearing--as they are--about G, then the strings should be cut, a new designee should be named who could command respect, and we should move on.)


    Parent
    -- Suave (none / 0) (#23)
    by ricosuave on Thu Jan 15, 2009 at 12:01:16 PM EST
    You can't be tainted by your own actions...only by the person that appoints you! ;)

    Seriously, though, I agree with you that the idea of Geitner being tainted is ridiculous, but that is not what is in play here.  It is not the man that is getting tainted (well...a little, but not much), but it is the hearings and the smooth transition.  

    If the republicans choose to paint him as a tax-evader (and how can they resist that?) then the confirmation hearings will be mildly conentious and focus on Geitner's tax troubles instead of on policy.  The republicans will probably vote against him, and Obama/dems will have to decide whether they want to ram him through or try to be post-partisan.  I suspect the transition guys won't want to fight for this one, but maybe since most of the bigwigs are through the gauntlet they feel they have little to lose.  But this is the guy who must spearhead the financial plans and these republican senators are the ones who must be worked with to pass it, so it is likely that the Obama folks will kowtow in some fashion, and possible they will pull the nomination.

    P.S. Your comments on the screen name show impeccable taste, and also demostrate that you are over 30 and watched way too much tv when you were younger.

    Parent

    Right on! (none / 0) (#9)
    by Abdul Abulbul Amir on Thu Jan 15, 2009 at 08:23:45 AM EST

    Maybe 75% is closer.  A Dem ripping off Social Security is rich.

    Parent
    As a math phobic small business owner (5.00 / 5) (#7)
    by esmense on Thu Jan 15, 2009 at 08:23:25 AM EST
    and former sometime freelancer I've spent a lifetime concientiously trying to figure out what taxes I owe, and making sure that I've figured it out correctly. I don't believe Mr. Geithner made a "mistake." To me, this looks like willful resistance to paying what's due (until forced to by the IRS and the Obama vetting process). I suspect Mr. Geithner may subscribe a bit to the Helmsley philosophy of taxes as something only "the little people" pay and I even wonder, since it was self-employment taxes that he was so cavalier about, what this indicates about his attitude toward Social Security (which I'm pretty sure he thinks, correctly, is something he won't ever need).  

    He couldn't afford to pay? (5.00 / 1) (#12)
    by NealB on Thu Jan 15, 2009 at 09:34:43 AM EST
    The confusing thing in this for me is why he wouldn't pay it. Given the amounts he was found to owe, surely he had the money to make the payment. Why would he purposely fail to pay it?

    On the other hand, if he can't do his taxes correctly, will he goof up as Treasurer too?

    Something rotten in Denmark (5.00 / 4) (#14)
    by jbindc on Thu Jan 15, 2009 at 09:48:33 AM EST
    The IMF gives their employees offsets to pay their taxes, so for him to say he was not aware that he owed them, is a bit disingenuous.

    Again, this is the person who is supposed to oversee the IRS.  And, as Biden said, paying taxes is patriotic, so is Geithner not a patriot?

    The IMF also has a person whose sole job it is (5.00 / 1) (#36)
    by allimom99 on Thu Jan 15, 2009 at 05:20:07 PM EST
    to advise employees on tax issues. Did Mr. Geithner not know what the offsets he got were for? I doubt it. He's a money guy for chrissakes! He also claims that he was told by an accountant that he was OK after the 1st instance. If this is true and he was NOT OK, why was the accountant not sued for E&O violations?

    This might not seem so bad if it were, say, Tom Vilsack who had these problems, but Geithner is supposed to be overseeing the IRS. He should be withdrawn and the job offered to Sheila Bair.

    Parent

    i don't believe (5.00 / 1) (#15)
    by cpinva on Thu Jan 15, 2009 at 10:24:14 AM EST
    It probably disqualifies him for Treasury, but I don't think it makes him a horrible person.

    anyone even hinted as much. however, given that the rank-and-file in the IRS are subject to very stringent reporting/paying requirements, it would be just a tad hypocritical to have the secty. be someone unable to meet those basic obligations.

    let's be clear, we aren't talking rocket science here, we're talking very basic federal tax law. if he's that ignorant, at his level, i'm not sure he's competent enough to head the treasury dept.

    Not so basic here (none / 0) (#16)
    by gyrfalcon on Thu Jan 15, 2009 at 10:34:42 AM EST
    IMF, like other intenational organizations, apparently, tells its employees they are technically self-employed, but then for some reason gives them W-2s instead of 1099s or whatever the other form is.  His mistake is apparently a common one for IMF and other employees, so the organization clearly isn't spelling these things out for U.S. employees terribly well.

    Parent
    Perhaps his experience w/ this will make him more (none / 0) (#22)
    by jawbone on Thu Jan 15, 2009 at 11:14:02 AM EST
    willing to look at tax laws with the individual who does his/her own taxes in mind. Cut some slack.

    But, the SecTreas doesn't really have all that much to do with the IRS, really. Right?

    Parent

    It would sure be nice (none / 0) (#31)
    by gyrfalcon on Thu Jan 15, 2009 at 02:53:15 PM EST
    if some Treas. Sec. somewhere along the line would reform the whole IRS culture so it doesn't behave like jack-booted thugs.  But I doubt this next TS, Geithner or somebody else, is going to have time to spend on that question.


    Parent
    Mr. Geithner spent (5.00 / 1) (#17)
    by KeysDan on Thu Jan 15, 2009 at 10:42:26 AM EST
    thirteen years at the Treasury Department, including as an undersecretary, a director of the IMF, and, since 2003, president of the NY Fed.  In the latter position he was not exactly prescient about the Wall Street debacle, but his perch on top of the house of cards seems to have given him "unique qualifications" to deal with its aftermath.  Indeed, he is so smart that it is held that we cannot afford to not hire him (and, of course, probably not able to fire him either).  Mr. Obama notes that his tax delinquency is an embarrassment to him, but I might add that it is, also, an embarrassment to the new administration, as Mr. Obama chose Mr. Geithner despite knowing of the tax issue.  Mr. Geithner may be as terrific as advertised, but surely there is equivalent expertise available to provide Treasury Department leadership from someone who has not bumped into IRS problems.. especially at a time of governmental cynicism and during a period of diminished confidence. But, no real need, I guess, to get overly exercised since the Republicans are only playing with Obama, and will confirm Geithner, a true friend of Wall Street

    Good analysis, KeysDan (none / 0) (#32)
    by christinep on Thu Jan 15, 2009 at 02:54:05 PM EST
    There will surely be someone reputed to be equally brilliant...and, hopefully, someone whose own record on financial matters is above reproach.


    Parent
    Terrific, another yahoo running Treasury (5.00 / 2) (#18)
    by Militarytracy on Thu Jan 15, 2009 at 11:00:13 AM EST
    who has no respect for rules and the framework that supports our civil society and social structure.  Another yahoo running Treasury for whom ethics and money morph a lot.

    Silly (none / 0) (#30)
    by gyrfalcon on Thu Jan 15, 2009 at 02:51:15 PM EST
    He made a mistake in a murky tax situation and paid up.  Lots of people do that.  You sound like Sean Hannity screeching about illegal immigrants having no respect for the laws of the United States.


    Parent
    "Murky" (5.00 / 1) (#33)
    by christinep on Thu Jan 15, 2009 at 03:00:46 PM EST
    I don't buy the claim that it was a "murky" situation. It doesn't square with others' experiences in similar situations. This is especially so given his reputed brilliance. The more that I read about G the more he appears to be a lot less than what we want in Treasury and in the Obama administration at this time. Appearances become reality; and, he appears--without some very compelling additional info--to resemble a number of quick, moneymakers on Wall Street. I'd like to see someone a bit better than that, someone who inspires some confidence in his own financial management and in the country's. Unless we hear persuasive reasons to the contrary, let's find a nominee with a Democratic perspective and move on.

    Parent
    four years? (none / 0) (#34)
    by Wile ECoyote on Thu Jan 15, 2009 at 04:27:22 PM EST
    I guess we are lucky he remembers to put on pants in the morning.  

    Parent
    I can't believe that I'm agreeing with you (none / 0) (#42)
    by Militarytracy on Sat Jan 17, 2009 at 08:17:33 AM EST
    but I am.  Can we all also admit too that when an employer pays us extra in our paychecks to pay a tax and not have it affect the bottom line of what our "salary" is, that that never goes unnoticed by any of us?  My husband does our taxes every year too.  He is in many respects a jarhead who insists on understanding how and where he is taxed.  If he had made a mistake four years in a row and was audited and it was revealed in two of the years, he would have immediately paid the other two as well.  The apologists for this guy are ridiculous.  Can we restore some ethics or should I just give up on that CHANGE?

    Parent
    iokiyad (none / 0) (#35)
    by sarcastic unnamed one on Thu Jan 15, 2009 at 04:41:34 PM EST
    there is one teensy, weensy, (4.85 / 7) (#4)
    by cpinva on Thu Jan 15, 2009 at 08:04:54 AM EST
    itsy bitsy problem here. if you are an employee of the IRS, which is part of Treasury, you can be fired for failing to file your taxes timely, or knowingly filing them incorrectly.

    so that could well be a legitimate issue.

    I'm usually not a big fan of Ed Schultz (4.75 / 4) (#2)
    by magster on Thu Jan 15, 2009 at 07:57:25 AM EST
    but I agree with his point yesterday that this has all the appearance of there being two classes in this country, and if you're in the elite Wall Street class, scamming your taxes is "no big deal" "happens all the time" "easy mistake" etc.  To see the Republicans on the committee essentially brush this issue off as no big deal reaffirms this.  

    This certainly comes off as more of the same stuff that brought us to this point in the first place.

    He has to be squeaky clean IMO (4.75 / 4) (#6)
    by Saul on Thu Jan 15, 2009 at 08:12:59 AM EST
    especially this cabinet member that will be in charge of the IRS  After all the talk by Obama, change, accountability, changing how pol do business in DC, where did the first 350 billion bail go to,  etc, etc, then Obama cannot say oh well it was no biggy confirm him no need to labor on such a insignificant issue like not paying your back unemployment taxes.  

    Esp'ly as the Cabinet officer in charge of TARP, (none / 0) (#19)
    by jawbone on Thu Jan 15, 2009 at 11:07:09 AM EST
    last half at least.

    BTW, for little people, even when the mistake is the IRS's (Some clerk entered my tax info incorrectly and caused a refund to be sent to me which I had not claimed nor had tried to figure in--I assumed I'd made a math error and cashed the check. A couple years later, the demand came for repayment--with interest. When I said the mistake was not mine, that I legitimately owed the original amount, but the interest seemed unfair since the IRS had made a mistake, I was told that was no excuse. I was supposed to have double checked what the IRS did and thus was responsible for the interest. I recall when I got the refund, with it's little explanation of why it was being sent, thinking I was perhaps going early Alzheimer and having trouble with math. Heh.), the little people are expected to have known the IRS made a mistake and correct it for them.

    Parent

    Maybe not (none / 0) (#3)
    by blogname on Thu Jan 15, 2009 at 07:57:56 AM EST
    It is not clear that he was "trying to get away with it," even if he knew about the obligation. Enforcement for failure to pay usually involves a demand letter and repayment options, rather than prosecutions. Ultimately, the government simply wants the money. I do not believe this means he is a terrible person. But I also urged restraint with respect to Burris and Blagojevich. Our society loves to impose all manner of collateral penalties (officially and otherwise) on people who behave like people (i.e., make mistakes). It is absolutely ridiculous.

    This crock of merde stinketh. (none / 0) (#11)
    by wurman on Thu Jan 15, 2009 at 09:19:51 AM EST
    Folks who have a mix of wages, dividends & interest, capital gains, consulting fees, farm or business income, etc., have a moderate degree of difficulty in sorting out which falls into the specific cagegories set out by the tax code.

    My confusion is that Mr. Geithner's earnings at the IMF apparently were not subject to witholding.

    More confusing is that, in my guesstimate, the man's earnings were clearly sufficient to exceed the maximum total annual FICA payments for those years.  The witholding maxes out at a different top figure each year.  Per Samarak:
    -1999   $72,600
    -2000   $76,200
    -2001   $80,400
    -2002   $84,900
    -2003   $87,000
    -2004   $87,900
    -2005   $90,000
    -2006   $94,200
    -2007   $97,500
    -2008  $102,000
    It seems that Geithner would have had more than $87,000 in wages subject to witholding in 2003, so there's some other factor involved with the "mistakes."

    Wikipedia:

    At the International Monetary Fund he was director of the Policy Development and Review Department (2001-2003).  In October 2003, he was named president of the Federal Reserve Bank of New York.[15] His salary in 2007 was $398,200.

    Whoever paid him his wages in 2003 & 2004 should have taken out the FICA max.  If his IMF & Federal Reserve paychecks were not subject to FICA, then his failure to send it in may simply be a foolish mistake.

    I've been there & done that with overseas income, so the error(s) seem plausible.

    1099 (5.00 / 1) (#25)
    by ricosuave on Thu Jan 15, 2009 at 12:25:58 PM EST
    It sounds like he worked under a 1099 (as opposed to a standard W-2), which is not at all uncommon but not something most workers have to do.  (I am a consultant, so I have done it alot.)

    When you are a 1099, you don't have any witholding at all.  You are responsible for your taxes, you generally pay quarterly, and you have to calculate the approximately 15% SE tax.  (You pay both the employer and employee portion of the taxes.)  There are certain rules of eligibility for being a 1099, and if your employer tries to pay you as a 1099 when you don't qualify (which most employees wouldn't) then they can be dinged by the IRS.

    Most everyone who takes a job as a 1099 understands the implications.  If they didn't understand it when they took the job, they figured it out when they did their taxes for the first year.  You have to fill out a schedule C for the business, and you fill in the income from the business in a separate place on the 1040.  It is pretty hard not to see the line item for SE tax, and your tax software will definitely point it out to you.

    Foolish mistake is a very forgiving term for screwing it up in the first place.  It is not really adequate for describing the fact that he didn't pay for the years that were not requested by the IRS.  I don't know anyone (other than political types trying to remain squeaky clean) who would willingly volunteer the payments for the other years if the IRS didn't ask for them, but every single one of them would know that they are wilfully disregarding the law.

    Aside from all of that, the great thing about being a 1099 is that you get to deduct all kinds of cool stuff that employees don't deduct.  Home office deductions (including a portion of your utilities), transportation expenses, entertainment, supplies, advertising, etc.  Will Geitner be turning over these returns to the committee, and will the Republicans start asking him about the portion of his cable bill that he deducted?  Will they throw out perfectly reasonable entertainment expenses and ask him if he really spent thousands of dollars on meals?  Did he properly account for the home office deductions when he sold his home?  All out-of-context numbers sound embarassing when they are listed in committee hearings.  Since he probably lived in a million-dollar-plus pad in the DC area the numbers will probably be big and sound elitist.  And that's just assuming everything he deducted was kosher...

    This guy is not Ollie North, but there is definitely a can of worms here.  And republicans generally like worms.

    Parent

    No (none / 0) (#28)
    by gyrfalcon on Thu Jan 15, 2009 at 02:44:35 PM EST
    For reasons that aren't clear to me, although IMF employees are considered to be self-employed and IMF does not withhold taxes or pay the employer's FICA share, they are paid under W-2s, not 1099s.

    That's the source of the whole problem, and it's apparently something employees of IMF and other similar organizations screw up all the time.

    Parent

    actually, the IMF DOES pay an offset for the FICA (none / 0) (#37)
    by allimom99 on Thu Jan 15, 2009 at 05:25:37 PM EST
    owed. Again, what did he THINK that money was for? For being a good little technocrat? Please.

    Parent
    You don't get to deduct (none / 0) (#29)
    by gyrfalcon on Thu Jan 15, 2009 at 02:48:17 PM EST
    for a home office unless you actually, you know, have to work out of a home office.  Geithner can only deduct home office expenses proportionate to the percentage of his time he had to work from there (and of course, the percentage of his house's square footage his office consists of).  In his case, probably a whole hell of a lot more trouble to calculate than it's worth.

    Parent
    Many categories involved here. (none / 0) (#38)
    by wurman on Thu Jan 15, 2009 at 05:50:29 PM EST
    One part of my overseas work was not W-2 & not 1099.  An actual foreign employer doesn't use either form.

    Another oddity is that such stuff is usually supported with quarterly payments to the IRS for both FICA & FITW.  By the time a person misses that 2nd quarterly installment, he or she should have received a nastygram from the IRS.  This is apparently not the case for Geithner--which still seems odd to me.

    It's still my opinion that Geithner's income was such that his first quarterly tax installment would have equalled the maximum FICA for the year, back at the time--which would have been about $13K.  It may be that his quarterlies came up short at the end of the tax year(s) & the IRS made the decision that he failed to pay the FICA, which is different than failing to pay enough FITW over the 2 or more different years.

    If Geithner had been a scofflaw, this would've been a lot more ugly a long time ago.

    Another complexity I've encountered is that working overseas & staying out of country for 335 days out of 365 made my earnings both income tax & social security exempt--nada.  However, one time I came back to the USA 21 days early & lost my exempt status &, ouch, that really hurt.  It was principal, penalties, & interest EVEN THOUGH there was absolutely no intent on my part.  I did manage to pay the 4th quarter installment on time & get out from under part of the burden.

    It'll be interesting to hear about or read how this may play out.

    Parent

    No need for speculation (5.00 / 1) (#41)
    by ricosuave on Thu Jan 15, 2009 at 10:54:32 PM EST
    The senate docs lay it all out.  If you look at this document released by the Senate (which I found through this McClatchy article), it says:
    • the IMF is not required to withhold taxes or pay the employer portion of FICA
    • Geitner was paid on a W2, but was responsible for paying the self employment tax
    • The IMF gives its employees a booklet explaining what taxes they are required to pay
    • The IMF gives money to its employees to pay these taxes.  This money is called a "gross-up."
    • The IMF gives its employees a rundown each quarter of the gross-ups they have received (which, presumably, gives them a total they should pay in quarterly taxes)
    • The IMF gives its employees a yearly detail of their income including all the taxes they need to pay
    • Employees fill out a form each year to request the "gross-ups" that they will get to cover their taxes.
    • Geitner acknowledges that he received all of these items and filled out these forms
    • Even though he did not pay the SE tax for this income, he paid it for his separate consulting income for which he filed a schedule C
    • He used tax preparation software to prepare his taxes.
    • There are actual copies of the payroll statements he received which SPECIFICALLY LIST the amount he received to cover SE taxes.
    • There are actual copies of emails and attached payroll statements which detail how to figure your SE tax taking into account days you worked abroad.  The statement lists the number of days worked abroad (in this case 1 day) and lists the SE tax owed for that quarter.

    So to recap:

    • He was spoonfed the amounts he needed to pay
    • He was clearly instructed in multiple ways that he owed this tax
    • He understood clearly how to pay SE tax as he paid it just fine on his separate consulting income
    • He used tax preparation software when he did his own taxes


    Parent
    Yeah, doesn't seem to ... (none / 0) (#13)
    by Robot Porter on Thu Jan 15, 2009 at 09:36:57 AM EST
    be a sin of greatest magnitude, and I buy that it could have been a foolish mistake.

    FICA can be confusing if you have a mix of salaries and self-employment income.

    It probably disqualifies him for Treasury, but I don't think it makes him a horrible person.

    Parent

    IMF, as an international body, does not pay FICA-- (none / 0) (#21)
    by jawbone on Thu Jan 15, 2009 at 11:10:30 AM EST
    but it increases the amount paid to the employee to cover such taxes, to make the employee "whole." Geithner paid for his individual FICA, but did not pay the employer's portion, which he had been reimbursed for by the IMF. The child support issues I know nothing about.

    Parent
    Success is getting what you want. (none / 0) (#24)
    by jimakaPPJ on Thu Jan 15, 2009 at 12:11:38 PM EST
    Happiness is wanting what you get!

    More on Geithner (none / 0) (#26)
    by christinep on Thu Jan 15, 2009 at 01:35:18 PM EST
    From the beginning, there has been something not quite right. Before all this, G was involved up-to-his-eyeballs in the financial fall on Wall Street (the recent article in Pro Publica suggests a certain laxness in oversight of Citigroup as well--perhaps.) Normally, I do not get exorcised about tax code intricacies. But--ta da--this is supposed to be the brilliant Treasury Secretary Designate. Foolishness or selfish back-of-the-hand haughty carelessness...I don't know what we have here in G. I do know this: It doesn't pass the ole smell test when you really ask yourself whether this kind of person is the kind of person who should be Treasury Secretary (and, of course, boss of IRS) in such challenging times. What kind of respect will he command in the important opening days? Jokes and snickers? It seems to me this may be one of those classic  upper echelon good old boys who is more a meek follower than a leader. There certainly are a number of qualified people ready to step in here (not the least of which really does appear to be Larry Summers.) Maybe G can assuage our downhome concerns about why he should mismanage his own taxes and be rewarded for it or maybe he cannot. As the NY Times suggests, we do need to hear a lot more than "mistakes were made."

    Here are additional bits of info (none / 0) (#39)
    by Green26 on Thu Jan 15, 2009 at 06:23:54 PM EST
    From the online Wall St. Journal today:

    1. Note the second sentence.

    "It's possible some of Mr. Geithner's problems stemmed from bad advice. In 2004, an accountant advised Mr. Geithner in writing that he did not owe employment taxes. An accountant who reviewed Mr. Geithner's 2001 tax return also didn't inform Mr. Geithner he owed taxes, according to an Obama aide familiar with the situation."

    2. As someone mentioned, these were apparently the employer portion of self-employment taxes, and apparently organizations like the IMF do pay or withhold for self-employments taxes, even though they are owed. Note that the below protion of the IMF booklet doesn't mention the employer share of self-employement taxes.

    "An IMF booklet on taxes, which Mr. Geithner told the Senate panel he received, instructed employees that "you pay the employee's share of U.S. Social Security taxes."

    3. "Tax professionals noted that even trained preparers sometimes miss the subtleties involved in taxation of employees of international organizations."

    Other bits of info:

    A. With regard to his '01 and '02 tax returns, I believe the 3-year IRS statute of limitation had already run, at the time of the 2006 audit. Thus, in some respects, even though he hadn't paid those amounts, he really didn't owe them and the IRS had no way of collecting them.

    B. 2006 IRS Press Release (note the 3rd para.):

    "IRS Makes Settlement Offer to Certain Foreign Embassy Staff

    IR-2006-180, Nov. 17, 2006

    WASHINGTON -- The Internal Revenue Service today encouraged U.S.-based employees and former employees of foreign embassies, foreign consular offices and international organizations to participate in a one-time settlement initiative to resolve tax matters related to their employment.

    The offer is only open to U.S. citizens, green-card holders and foreign employees with a U.S. tax obligation. Accredited diplomatic personnel are generally exempt from income taxes on their wages under international treaties or agreements.

    The IRS estimates that as many as half of the employees subject to U.S. tax either fail to report their wages, claim deductions they are not entitled to, incorrectly establish SEP/IRA retirement plans, fail to pay self-employment tax or fail to file tax returns at all.

    The IRS is offering a settlement initiative for these employees which will expire on February 20, 2007. In order to participate in the initiative the employees must submit amended or original tax returns for tax years 2003, 2004 and 2005 which properly reflect their income and expenses.

    Failure to act now could mean facing a costly audit process in the future. Foreign embassy, consular office or international organization employees who fail to come forward may be subject to IRS audits and penalties which could cover more than just three years.

    The IRS is offering a settlement initiative for these workers if they come forward between now and February 20, 2007."

    Quoted below are some of the (unclear, in my view) certifications that he made (and some are trying to hand it for):

    1. What does this mean? What's the difference between self-employed and employed obligation?

    `I wish to apply for tax allowance of U.S. Federal and State income taxes and the difference between the "self-employed" and "employed" obligation of the U.S. Social Security tax which I will pay on my Fund income."

    2. What does this mean? There's no reference to what tax allowance payments are. How does one calculate taxes on tax allowance payments? I would interpret this to mean that the taxpayer will pay income taxes on additional amounts received as tax allowance. When a taxpayer is "grossed up" for taxes or additional taxes, additional income taxes are owed on the gross up amount. Anyway, not very clear.

    "I hereby certify that all the information contained herein is true to the best of my knowledge and belief and that I will pay the taxes for which I have received tax allowance payments from the Fund."