Wednesday, January 21, 2009

Treasury Secretary Confirmation

I'm watching some of the Senate confirmation hearing for Treasury Secretary Tim Geithner. It's just amazing to me that with the state of the economy as it is and the importance of this position and Geithner's outstanding qualifications for the position, that all they seem to care about is what by all accounts seems a reasonable mistake on this tax returns which he has admitted and corrected. Come on Congress.

As near as I can tell, he worked for the IMF but for some reason still owed self-employment tax. He did it first year and then in following years used an accountant and everything seemed fine, so he continued doing the same thing.

8 comments:

DKB said...

As I understand it, the IMF specifically tells its US employees that their pay is "grossed up" to compensate for the payroll taxes they must pay on their own, and makes them sign a release saying they understand it.

I'm not suggesting that he intentionally tried to dodge it, but it's not unreasonable to expect a financial professional to be able to understand this if it is in fact true that the IMF informed him about it when he started working there. The bit about the tax accountant is really interesting... if Geithner gave all the information to the tax accountant and still got the wrong answer, perhaps the accountant isn't giving good advice to his customers in general.

Howard said...

I'm not saying I follow it all, but apparently he screwed up the first year, but the IRS didn't mention it. So the next year he copied and it was ok again. Then he got an accountant who didn't find a problem. At one point he used Turbo Tax and it didn't mention anything wrong.

He submitted the IMF forms and one Senator was reading quotes from it. It didn't seem obvious to me what was wrong. There were fed, state and self-employment boxes. He had done the federal and state ones but no the SE one. He thought he was an IMF employee, not a self-employed person paid by the IMF.

He's admitted and corrected the mistake. Such things happen with taxes and the IRS often. Move on. By all accounts, his service at the NY Fed has been outstanding. Ask him about the crises and what he intends to do.

DKB said...

Ask about the crises? You mean ask him substantive questions about his qualifications for the job? What are you THINKING? They have to have some theater to distract from the fact that my own dear shag-wit senator Cornyn is dragging out the Attorney General's confirmation because he's afraid someone might get prosecuted for doing what W told them to (illegally) do.

I didn't mean to suggest that I think Geithner isn't qualified for the job, just that there is some indication that the complicated situation he was in shouldn't have been a surprise. That said, the W-2 I'm looking at right now has no indication of my employer's contribution for payroll taxes, nor is there a box to house such a number... so the IMF probably should have paid him as a 1099 employee (making it clear he was treated as self-employed from their point of view) if they didn't want to pay their part of the payroll taxes directly.

Anonymous said...

I think the issue being discussed is if the secretly of the treasury made an intentional or unintentional mistake on his taxes. As I understand it the treasury runs the IRS, and IRS employees are terminated if found to have mistakes in their taxes. Thus there is an appearance of a double standard.

It also sounds like he employed an illegal alien as a nanny.

It's hard for me to believe someone who thinks $30k is a rounding error can't hire someone good to do his taxes, or figure our his nanny doesn't have a green card and isn't paying social security. The guy was cutting corners, and is being grilled a bit for it. It's sad this is the best person avalable.

Howard said...

By all accounts it's an unintentional error. Sure question him on it, but the administration and the senators have gone over this already before today.

His wikipedia page summarizes things well. The $35K was over several years and wasn't a rounding error. It was an issue in his 2003-4 returns and came up in a 2006 audit. Now he realized that it applied to 2001-2 as well.

The nanny is that in the last 3 months of her employment her authorization expired, that's different than hiring an illegal alien.

It's not at all sad that he's the best choice, he's extremely well qualified and respected. As Obama said, if only people who've never made a mistake are allowed in the fed government, no one will work there.

IRS employees are not fired for "mistakes" The issue is deliberate abuses. See this.

Anonymous said...

Which is more believable: that he and his auditor missed the 2001-2002 issue in 2006 when they found the 2002-2003 issue, or that they found both mistakes and he decided not to repay his 2002 debt because the statue of limitations had run out?

Ignoring the mistakes he made in 2002 & 2003, he showed poor judgment in 2006 and should have the character to admit this.

Howard said...

They may have known in 2006 that there was a problem with the 2001-2 returns, or, they might have concentrated on what was actually being audited. Either way, at the time he paid what was owed. I'm not sure anyone would have gone back to pay taxes they no longer had too. Anyone except someone up before a Senate confirmation hearing.

And I heard him admit the mistakes many times. I also believe I heard him say that in 2006 he should have realized about the problems with 2001-2, but I doubt he would say he played the statute of limitations card at the time, even if he did (which we don't know). You do pay accountants to make sure you pay the fewest taxes possible, legally.

Anonymous said...

No one mentioned that the IRS waived the big penalties – I understand this is rarely done unless there are financial reasons.

I hope the “Average Joe” gets the same break.

Riffman