Treasury Department Nominee Skipped Taxes

WASHINGTON (AP) - President-elect Barack Obama's choice to run
the Treasury Department and lead the nation's economic rescue
failed to pay $34,000 in taxes from 2001 to 2004, but the
last-minute disclosure didn't stop Senate Democrats from moving
forward with his nomination.
Timothy Geithner had paid some of the back taxes in 2006 after
the IRS sent him a bill. When the Obama transition team discovered
he owed even more back taxes, Geithner paid those additional taxes
days before Obama announced his choice in November, according to
materials released by the Senate Finance Committee considering his
nomination.
Obama's staff told senators about the tax issues on Dec. 5.
Finance Committee Chairman Max Baucus, D-Mont., said he still
hoped Geithner could be confirmed on Inauguration Day, asking
senators for unanimous consent to skirt rules and schedule a
hearing as early as Friday.
"These errors were not intentional; they were honest
mistakes," Baucus said after he and other committee members met
with Geithner behind closed doors on Tuesday.
It was not clear Tuesday whether committee Republicans would
sign off on Baucus' request for a quick hearing.
The panel's senior Republican, Sen. Chuck Grassley of Iowa,
hasn't decided whether the revelations are reason enough to oppose
Geithner, said spokeswoman Jill Kozeny. He believes they are
"serious, and whether or not it's disqualifying is to be
determined," she said.
Another prominent Republican, however, spoke up for Geithner.
Utah Sen. Orrin Hatch, another committee member, said he continues
to support the nominee.
"I have no problem," Hatch told Fox News. "He's a very, very
competent guy."
After senators met with Geithner, the panel released 30 pages of
documents detailing his tax errors - and also how he came to employ
a housekeeper whose legal immigrant work status had briefly lapsed
in 2005.
Senate Majority Leader Harry Reid, D-Nev., dismissed the events
as "a few little hiccups," and said he was "not concerned at
all" about the impact.
Obama reiterated his support for Geithner.
"He's dedicated his career to our country and served with
honor, intelligence and distinction," incoming White House
spokesman Robert Gibbs said. "That service should not be tarnished
by honest mistakes, which, upon learning of them, he quickly
addressed."
Geithner, plucked from his job as president of the Federal
Reserve Bank of New York to serve as Obama's treasury secretary,
told transition officials and senators that he didn't know he owed
self-employment taxes when he worked for the International Monetary
Fund.
He failed to pay self-employment taxes for money he earned 2001
to 2004 while working for the IMF, according to materials released
by the Senate committee. In 2006, the IRS notified him that he owed
$14,847 in self-employment taxes and $1,885 in interest from 2003
and 2004, which he paid after an audit. The IRS waived penalties
for those tax years.
Transition officials discovered last fall that Geithner also had
not paid the taxes in 2001 or 2002. He paid $19,176 in back taxes
and $6,794 in interest for 2001 and 2002 several days before Obama
announced his choice, the committee documents showed. All told,
Geithner had failed to pay $34,023 in self-employment taxes for the
years 2001 to 2004.
Geithner and his supporters have said his mistake was a common
one for people hired by international organizations that don't pay
the employer share of Social Security taxes. The IRS estimated in
2007 that as many as half those employees had made tax-filing
mistakes, and offered a group settlement to let them correct the
errors. Geithner told Obama's team and senators that an accountant
had reviewed his tax returns after Geithner prepared them and
didn't discover the problem.
But some tax experts said the problem is not that common.
Tom Ochsenschlager, vice president of tax for the American
Institute of Certified Public Accountants, said it would be
difficult for someone preparing a tax return for a self-employed
person to skip the Social Security and Medicare tax lines.
"It's such a basic mistake that I kind of wonder if we know all
the facts," Ochsenschlager said of Geithner's situation.
Geithner filed amended tax returns for 2001 through 2006 after
Obama's team reviewed his records.
The committee's materials said Geithner "has experience with
Social Security tax issues." He filed the taxes late for his
household employees in 1996 for years 1993 to 1995; he incorrectly
calculated Medicare taxes for his household employees in 1998 and
received an IRS notice; and he received notices from the Social
Security Administration and the IRS after not filing 2003 and 2004
forms for his household employees, the report states.
Geithner also said he didn't realize a housekeeper he paid in
2004 and 2005 did not have current employment documentation as an
immigrant for the final three months she worked for him, the
documents indicated.
One of his housekeepers' legal authorization to work in the
United States expired on July 15, 2005, and the person continued to
work for Geithner until October of that year, the committee's
report states.
Geithner is the second Obama Cabinet choice to face controversy.
New Mexico Gov. Bill Richardson withdrew his name on Jan. 4 as
Obama's commerce secretary after questions surfaced about a federal
investigation concerning contributions and a state contract.
Geithner's tax problem was at least the second time such a
situation has touched an Obama appointee. Nancy Killefer, the
management consultant selected last week to become the new
administration's chief performance officer, failed to pay
unemployment compensation taxes, apparently on household employees.
In 2005, the District of Columbia placed a $946.69 tax lien on her
home over the unpaid taxes. Over a year and a half, she had failed
to pay $298 in taxes plus the rest in interest and penalties, and
she cleared up the debt within a few months.


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