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Geithner Didn’t Pay Taxes

Timothy Geithner neglected to pay a rather large sum in taxes owed to the Treasury Department he’s been nominated to lead.

President-elect Barack Obama‘s choice to run the Treasury Department and lead the economic rescue effort disclosed to senators Tuesday that he failed to pay $34,000 in taxes from 2001 to 2004, a last-minute complication in an otherwise smooth path to confirmation.  Timothy Geithner paid most of the past-due taxes days before Obama announced his nomination in November, an Obama transition official said. The unpaid taxes were discovered by Obama’s transition team while investigating Geithner’s background, the official said.

How convenient!

Geithner failed to pay self-employment taxes for money he earned while working for the International Monetary Fund from 2001 to 2003, the transition official said. In 2006, the IRS notified him that he owed $14,847 in self-employment taxes and $2,383 in penalties from 2003 and 2004. Transition officials discovered last fall that Geithner also had not paid the taxes in 2001 or 2002. He paid $25,970 in taxes and interest for those years several days before Obama announced his nomination, the transition official said.

Geithner also 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 transition official said.

I’ve never met the man but my default position on these sort of things is that it was an honest mistake.  He’s been in the public spotlight for quite some time and is held in high regard and, to him, a few thousand bucks isn’t much money.

The optics aren’t good, though.  I’m reminded of the consecutive picks to head Bill Clinton’s Justice Department who had broken the law by failure to pay Social Security taxes on their nannies.   Lawyers and economists aren’t necessarily experts in every single facet of the wide territory handled by people in those professions.  It’s still embarrassing, though, to get caught skirting the rules.

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About James Joyner
James Joyner is the publisher of Outside the Beltway, an associate professor of security studies at the Marine Corps Command and Staff College, and a nonresident senior fellow at the Atlantic Council. He's a former Army officer and Desert Storm vet. He has a PhD in political science from The University of Alabama. Views expressed here are his own. Follow James on Twitter.

Comments

  1. Ugh says:

    The NYTimes version has this:

    After a 2006 Internal Revenue Service audit identified the lapse on his 2003 and 2004 tax returns, Mr. Geithner paid tax and interest of $17,230 and the I.R.S. waived penalties, according to the transition.
    But Obama vetters discovered the same lapse for 2001 and 2002 and brought it to Mr. Geithner’s attention last Nov. 21, after which he paid tax and interest of $25,970, transition officials say.

    That leaves for Mr. Geithner the question of why he did not correct the earlier years’ non-payment of self-employment taxes after the 2006 IRS audit identified the problem for 2003 and 2004.

    (emphasis added)

    I would guess that the reason he didn’t “correct” the earlier years’ non-payment of FICA taxes after the 2006 audit was that the statute of limitations had run and he wasn’t required to.

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  2. tom p says:

    I would guess that the reason he didn’t “correct” the earlier years’ non-payment of FICA taxes after the 2006 audit was that the statute of limitations had run and he wasn’t required to.

    Ugh, as I recall there is no statute of limitations on unpaid income taxes, but I could be wrong. I suspect he just thought he had gotten away with it. And who can blame him? Evading taxes is the great American past time, is it not?

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  3. Ugh says:

    Ugh, as I recall there is no statute of limitations on unpaid income taxes, but I could be wrong.

    No, the general statute for income taxes is 3 years from the time the return is filed, which is extended to 6 years in certain circumstances, and longer if fraud is involved. There may be no statute if the individual never filed a return, but that doesn’t apply in this case.

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  4. markm says:

    Having a “money guy” with a slew of outstanding parking tickets/speeding tickets/failure to update your drivers license is what Harry Reid called “a few little hiccups”.

    Having a “money guy” and supposedly not just your run of the mill H&R Block type money guy fail to pay taxes…and he’s apparently qualified to run the Treasury Dept??..I read that the guy is a financial Einstein so how does this happen to a fella of his calibur?

    It may be on the up and up but the type of hiccups and the timing sure looks shoddy.

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  5. Bithead says:

    He’s been in the public spotlight for quite some time and is held in high regard and, to him, a few thousand bucks isn’t much money.

    $34,000 isn’t much money? Remind me to get a loan from you.

    The optics aren’t good, though. I’m reminded of the consecutive picks to head Bill Clinton’s Justice Department who had broken the law by failure to pay Social Security taxes on their nannies.

    Teah, almost like there was a pattern of dishonesty, or something.

    Here’s the thing, James . If I was outstanding in $34,000.00 with the taxes, the fed would be calling it a crime, not as Dingy Harry Reid called it today, a “hiccup”.

    Let’s also be honest enough to say that if there was a $34,000.00 tax bill outstanding on one of W’s nominees, the press would be all over and like a wet t-shirt, talking about who the next choice would be, since this one just blew up. And the Democrats…. but I repeat myself.

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  6. tom p says:

    No, the general statute for income taxes is 3 years from the time the return is filed, which is extended to 6 years in certain circumstances, and longer if fraud is involved. There may be no statute if the individual never filed a return, but that doesn’t apply in this case.

    thanx for the clarification ugh, clear as mud now… not your fault, our tax code is a joke.

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  7. tom p says:

    Let’s also be honest enough to say that if there was a $34,000.00 tax bill outstanding on one of W’s nominees, the press would be all over and like a wet t-shirt, talking about who the next choice would be, since this one just blew up. And the Democrats…. but I repeat myself.

    Bit, let’s be honest enuf to say that there is no $34,000 tax bill because he paid it.

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  8. [...] to James Joyner who says: I’m reminded of the consecutive picks to head Bill Clinton’s Justice Department who had broken [...]

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  9. Could be an honest mistake. I know a former state commissioner of taxes who was by profession a tax lawyer and, obviously, an expert on taxes. She had too much pride to pay someone to do her taxes. But she was too busy with her job to do hers. So her husband did. One year her husband did it wrong, so she got a letter from the Tax Dept with her own signature on it!

    Still, it wasn’t, in Geithner’s case a calculating error. It was a pretty big omission.

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  10. Bithead says:

    Not when he was supposed to. Isn’t that the standard you and I would have been forced to abide by?

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  11. markm says:

    Bit, let’s be honest enuf to say that there is no $34,000 tax bill because he paid it.

    Just the nick of time too….I mean…that coulda looked bad or something. At least he’s honest with his poor monetary practices.

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  12. davod says:

    What else will we find out after he has been confirmed?

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  13. Ugh says:

    Bithead: If I was outstanding in $34,000.00 with the taxes, the fed would be calling it a crime, not as Dingy Harry Reid called it today, a “hiccup”.

    Well, I happen to know of many many people in the same or very similar situation to Mr. Geither’s and none of them are facing criminal charges, just back taxes and interest, which if paid the IRS will go away. Just like Mr. Geither did.

    But I have no doubt that if you, Bithead, were $34,000 in arrears on your taxes, it would be a criminal violation, you being familiar with all the taxing statutes and what not, and yet still refusing to pay.

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  14. markm says:

    So, apparently he prepped his own taxes for the years in question:

    http://taxprof.typepad.com/taxprof_blog/2009/01/treasury-secretary-nominee-.html

    So he’s either a crook or he’s incompetent.

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  15. Bithead says:

    So he’s either a crook or he’s incompetent.

    More likely, both.

    The fact is, he didn’t make a move to pay this stuff until AFTER he was nominated. And wouldn’t it be interesting to know if he paid those funds out of pocket, of it that payment coincided with a mysterious influx of cash from un-named sources, into his accounts?

    And let’s assume, as seems likely, he’ll get confirmed anyway, despite these ‘hiccups’… Does this mean that the tax laws will be made simpler at his ins urging, I wonder? After all, his complaint… and the defense of the Democrat Senators was that working self-employed at the IMF was ‘all so confusing’.

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  16. Michael says:

    From the little bit I heard about this on NPR last night, it seems that working for the IMF makes your taxes a bit, well, interesting. The IMF doesn’t pay their half of the FICA taxes, rather it estimates how much it would have had to pay, and pays it’s employees that much on top of their salaries to account for it, who are then responsible for sending the correct amount to the federal government.

    What isn’t clear to me is whether Geithner failed to pay both halves of FICA, and just pocketed the extra money, or if he paid some portion of them, believing that it was the correct amount, but in reality was less than he owed. It doesn’t sound like he failed to pay any of them.

    If Geithner failed to pay any taxes, his half or the IMF’s half, then that is a serious question. If Geithner thought his employer was paying the employer’s share, and that he was only responsible for the employee’s share, that is an oversight (the article’s mention of self-employment tax leads me to believe this is the case). If Geithner just made mistakes in calculating his total tax liability, that’s an honest mistake, especially given the complexity of our tax code.

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  17. markm says:

    From the little bit I heard about this on NPR last night, it seems that working for the IMF makes your taxes a bit, well, interesting.

    I have to believe running the Treasury in the middle of an economic meltdown with no “road map” out has to be a bit more challenging than prepping even the most difficult tax return.

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  18. Michael says:

    I have to believe running the Treasury in the middle of an economic meltdown with no “road map” out has to be a bit more challenging than prepping even the most difficult tax return.

    I have to believe that running the Treasury will be his primary focus every day, instead of a necessary annoyance once a year.

    Everybody keeps calling this guy a financial markets genius, so I’m guessing this error was caused by a lack of attention, not lack of ability.

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  19. Michael says:

    I should note, however, that errors caused by a lack of attention can be just as serious as those caused by a lack of ability. If the Congress believes that this may be an issue with him in the role he has been nominated for, then they shouldn’t confirm him.

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  20. markm says:

    so I’m guessing this error was caused by a lack of attention

    I’d buy that if it was a one year tax return problem or hiccup…this wasn’t. Hell, i’d buy that if after the third year he had an epiphany and cut a check. He didn’t fully pay up until right before he was picked.

    As far as him being a money genius…i’ve read quite a few articles citing many top Wall Street types saying he’s brilliant. I don’t expect you’d get that job in tough times if you were not a stand out amongst stand outs.

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  21. Michael says:

    I’d buy that if it was a one year tax return problem or hiccup…this wasn’t. Hell, i’d buy that if after the third year he had an epiphany and cut a check. He didn’t fully pay up until right before he was picked.

    The IRS informed him in 2006 that he owed for 2003 and 2004, which he paid promptly after being informed. The Obama team informed him that he also owed for 2001 and 2002, something I gather the IRS hadn’t realized, and he again paid promptly after being informed.

    Now, you can question whether Geithner knew about the 2001-2002 mistake in 2006, after the IRS notified him about the 2003-2004 mistake, or whether he reasonably should have looked into those years and discovered it himself, and those are perfectly valid questions.

    Again, I’m not sure if he neglected to pay any of the IMF’s portion, or if he just miscalculated the IMF’s portion. If it’s the former, he should have checked previous tax filings. If it’s the latter, and the IRS only informed him about 2003-2004, he can reasonably assume that the IRS had already checked previous years, and that they were calculated correctly.

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  22. [...] his pick to run the Treasury Department, Timothy Geithner, apparently had a flap with, get this, the Treasury Department, over not paying som….  He paid them once he knew he would be nominated.  However, this makes his first recommendation [...]

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  23. John425 says:

    Why is everyone (including Joyner) apologizing for this jerk? Name me one conservative or Republican that didn’t get bashed or had their careers shortened for similar “honest mistakes”?

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  24. Franklin says:

    Oh please, both Republicans and Democrats get trashed for honest mistakes all the time by the other side. Stop pretending that everything is one-sided.

    FWIW, I think there’s a real problem here. Originally it was probably an honest mistake, but then the IRS flagged him about it. So he paid 2 years when he should’ve known full well that he owed 4 years. I find that questionable.

    It could still *possibly* be honest forgetfulness, but then you start questioning the guy’s ability (as above, is he a crook or incompetent?).

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  25. Michael says:

    FWIW, I think there’s a real problem here. Originally it was probably an honest mistake, but then the IRS flagged him about it. So he paid 2 years when he should’ve known full well that he owed 4 years. I find that questionable.

    That’s where I’m at, did he know, or should he reasonably have know, that he owed those taxes for 4 years, not just the 2 the IRS found. It depends on what he did wrong, and what the IRS told him he did wrong.

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  26. tom p says:

    That’s where I’m at, did he know, or should he reasonably have know, that he owed those taxes for 4 years, not just the 2 the IRS found. It depends on what he did wrong, and what the IRS told him he did wrong.

    Not to be repetitive but, evading taxes is a time honored American tradition. He thought the IRS missed 2 yrs of taxes and thought he could skate.

    Who here would have done more?

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  27. John425 says:

    tomp: There is a HUGE difference between AVOIDING taxes and EVADING taxes. The former is the time-honored American tradition. The latter gets you jail time.

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  28. tom p says:

    tomp: There is a HUGE difference between AVOIDING taxes and EVADING taxes. The former is the time-honored American tradition. The latter gets you jail time.

    John: agreed, but how many can tell the diff? I am just taking note of the fact that so much of this conversation is along the lines of, “Hey Pot, I’m, kettle. You’re Black!”

    ps: it only gets you jail time if you can’t pay up… amply proved by the case in point… and Leona Helmsly (sp?) on the opposite.

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  29. Michael says:

    Okay, more from NPR this evening. Evidently Geithner did his own taxes in 01 and 02, and had a professional tax preparer in 03 and 04. The IRS caught the mistake on the 03 and 04 filings, but not the 01 and 02 filings, so there is a reasonable possibility that Geithner still thought those filings (01 and 02) were correct after the IRS notified him of the problem with the 03 and 04 filings.

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  30. [...] Geithner Didn’t Pay Taxes [...]

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