Geithner and the IRS

| Comments (4) | Misc
OK, so while it's sort of ironic that the guy who will be in charge of the IRS screwed up his taxes, but seriously, Geithner is an economist, not a CPA. Sure they both involve money, but that's about it. Expecting him to understand the intricacies of tax law is kind of like expecting me to be able to build a semiconductor fab. Sure, they're both computer related, but otherwise there's not much of a connection. That's not to say that he did or did not deliberately underpay (I have no knowledge one way or the other), but according to the NYT it's a pretty common mistake and it sounds like his actual accountant signed off:
Mr. Geithner fully paid his state and federal income taxes. In failing to pay his payroll taxes, he in effect kept the money the I.M.F. had contributed toward his liability. However, Mr. Geithner's accountant told him he was exempt from self-employment taxes, according to Obama transition officials.

As Obama officials pointed out, and I.R.S. documents attest, the failure to pay Social Security and Medicare taxes is common among Americans who work for international organizations, including foreign embassies. A 2007 I.R.S. notice reported that up to half of such employees incorrectly file their tax returns.

That said, you'd think that the IRS could manage to design some set of forms that avoid this mistake. Geithner was issued a W-2 which pretty clearly shows that no FICA was withheld (it states "NONE"). How hard would it be to put something in that field that triggered your tax software to suggest you file a Schedule SE? "FILE SE", for instance? Or maybe "PAY UP"

4 Comments

To me, the big problem isn't that he made a mistake, but he made a mistake, got audited, the mistake was found for the *years of the audit* and then he didn't correct the mistake for the years *not* in the audit. That has a little bit of a bad smell (though I'm not sure it's a "this guy can't be Treasury Secretary" bad).

Tax laws are complicated, poorly communicated, and screwed up. I am in a position in which i have competing opinions from two different tax lawyers. So basically I am just rolling the dice and waiting for the IRS opinion. Which will take three years based on previous experience. Personally someone who has a problem with the IRS raises their credibility level with me.

Blake: Except in fraud, there is a 3 year statute of limitations.

So what everyone does is they pay the years of the audit, and have NO OBLIGATION to pay before that. Thus he and everyone else in his position had no obligation to pay 2001 and 2002, and so the IRS doesn't bother to check, and why should he?

So what happened is he paid tax he did not legally have to, and ONLY someone nominated for a cabinet level or similar position would pay, for 2001 and 2002, to make the politics of the confirmation process easier.

I'd find Geithner's explanation more convincing if the IMF didn't explicitly give him more money (you know, a line item on his pay stub) to pay for the self-employment taxes.

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