Taxes, Treasury Secretary Geithner and Joe Friday

Being self-employed I always have the great joy of paying my taxes four times a year in estimated payments.  I just did the one due on January 15, and in the fine mood that always puts me in, I thought it was time to recall  Treasury Secretary Tim Geithner and his difficulty paying some of his taxes.

The Wikipedia article on Geithner gives an excellent summary:

Tax scandal

At the Senate confirmation hearings, it was revealed that Geithner had not paid $35,000 in self-employment taxes for several years, even though he had acknowledged his obligation to do so, and had filed a request for, and received, a payment for half the taxes owed. The failure to pay self-employment taxes, in part due to the way his employer reported his wages which was not in accordance with tax law, was noted during a 2006 audit by the Internal Revenue Service (IRS), in which Geithner was assessed additional taxes of $14,847 for the 2003 and 2004 tax years. Geithner also failed to pay the self-employment taxes for the 2001 and 2002 tax years (for which the statute of limitations had expired) until after Obama expressed his intent to nominate Geithner to be Secretary of Treasury. He also deducted the cost of his children’s sleep-away camp as a dependent care expense, when only expenses for day care are eligible for the deduction. Geithner subsequently paid the IRS the additional taxes owed,and was charged $15,000 interest, but was not fined for late payment. As President of the Federal Reserve Bank of New York, Geithner annually completed an ethics statement noting any taxes due or unpaid, along with any other obligations. Geithner’s completed statement did not surface during confirmation hearings.

In a statement to the Senate panel considering his nomination, Geithner called the tax issues “careless,” “avoidable” and “unintentional” errors, and he said he wanted to “apologize to the committee for putting you in the position of having to spend so much time on these issues.” Geithner testified that he used TurboTax to prepare his own return and that the tax errors are his own responsibility. This statement is in conflict with statements by the Obama campaign that Geithner was advised by his accountant that he did not owe the taxes. The Washington Post quoted a tax expert who said that TurboTax has not been programmed to handle self-employment taxes when the user identifies himself as being employed. Geithner said at the hearing that he was always under the impression that he was an employee, not a self-employed contractor, while he served as director of the Policy Development and Review Department of the IMF. Geithner comments are contradicted by the Senate report that showed he was not only informed of his status, but that he actively applied for the allowance.

You may suspect that if you had the same difficulties that Geithner had in paying his taxes that the IRS might be sending you letters or court papers with terms like fraud, criminal penalties, etc, and I suspect you might be right.  However, following his confirmation Geithner turned over a new leaf.  He pledged a crack down on international tax dodgers.  Domestic tax dodgers?  Well, I guess that is a different matter.

3 Responses to Taxes, Treasury Secretary Geithner and Joe Friday

  • Amazing: Donald and I have a point of agreement!

    Count me a doubter from the beginning on Mr Geithner. There’s a certain breach of trust that a man chosen to a post like Treasury wouldn’t have his own treasury in order.

    On one hand, I can appreciate that Mr Obama would want a talented guy–and there’s no doubt the man is talented–on his team. My criticism is mainly that Mr Geithner was tagged as the superstar of economics from the beginning. This administration *had* to have him.

    On the other hand, even if we can concede Mr Geithner was the best, how much better than #2 could he really have been?

    Clearly, he could survive this in a way the head of the IRS might not have been able to. Or if we had been in less of an economic crisis, perhaps it would have been easier to jettison the nomination and settle for the second fiddle.

    The symbolism of it will probably not harm either the president or the head of Treasury, either in the next 3-7 years or post-administration. I suspect some people who make honest mistakes with their taxes (and those, perhaps like Mr Geithner, who don’t) won’t avoid the economic or professional harm as you’ve described here, Donald.

  • Calculating self-employment tax is Tax 101. Someone with Mr. Geitner’s resume should not have made an error in calculating this tax. He should also have reviewed his TurboTax-prepared 1040 before signing it and mailing it to the IRS. (He failed at his personal obligations.)

    Mr. Geitner is too incompetent for his current position, a crook, or both. Our government should only hire honest, qualified individuals and his dishonesty scares me more than his incompetence. (What secret deals is he cooking with whom?)

  • (What secret deals is he cooking with whom?)

    Yves Smith (“Naked Capitalism”) referred to him last spring as a ‘poster child for regulatory capture’. Seems about right.

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