Obama's Treasury Pick Did Not Pay Some Taxes

Treasury Secretary-designate Timothy Geithner has said he failed to pay $34,000 in taxes from 2001 to 2004. According to materials released by the Senate Finance Committee, a housekeeper whom Geithner paid in 2004 and 2005 did not have current employment documentation as an immigrant for the final three months she worked for him.

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MELISSA BLOCK, host:

President-elect Obama's choice for Treasury secretary has made some mistakes paying his taxes. Tim Geithner, the Treasury nominee, was on Capitol Hill today in a private meeting with the Senate Finance Committee, explaining why he had failed to pay $34,000 in taxes from 2001 to 2004. NPR's John Ydstie is here and John, Tim Geithner has been president of the Federal Reserve Bank in New York. He's the guy who's supposed to help get us out of this financial crisis. What's the explanation for this lapse in taxes?

JOHN YDSTIE: Well, it's being described as an honest mistake by the chairman of the Finance Committee, Max Baucus, a Democrat from Montana. But it's certainly got to be more embarrassing for Geithner than it might be for the rest of us making some tax mistake. During this period, he did do his own taxes, at least part of the time, but he also faced some complexities because he worked for the International Monetary Fund during this period. And employees of the IMF face different tax rules than the rest of us.

BLOCK: And what's the difference in those tax rules if you work for the IMF?

YDSTIE: Well, as I understand it from documents the Senate Finance Committee provided, the IMF doesn't withhold money for U.S. taxes, but it adds the approximate amount to the employee's pay. And then the employee has to forward the tax payments to the IRS. It appears that Geithner forwarded some tax payments, but not others. For instance, he owed Social Security tax to the U.S. government. He did forward the employee portion to the IRS, but he did not send in the portion of the Social Security tax normally paid by the employer - in this case, the IMF - which he was supposed to do.

BLOCK: And how did this all come up? Who discovered this?

YDSTIE: Apparently, the $34,000 error was discovered by the Obama transition team that was investigating Geithner's background. And according to documents from the Senate Finance Committee, the IRS had previously examined Geithner's 2003 and 2004 tax returns, and he had agreed to pay additional amounts on them, but the IRS waived any penalties there.

BLOCK: And we should say he has now paid these taxes plus interest and penalties.

YDSTIE: He's paid up. Exactly.

BLOCK: How much of a hurdle is this going to be for Tim Geithner, John?

YDSTIE: Well, given what we know now, I don't think it's going to be a big hurdle as long as it's concluded it was an honest mistake. That's what Senator Baucus is saying, that's what the Obama camp is saying. Unless it's demonstrated otherwise, this shouldn't block his confirmation. Even Republican Senator Orrin Hatch of Utah said as much today.

BLOCK: And there was another issue that came up today. Apparently, a housekeeper who worked for Tim Geithner a few years back had working papers that had expired.

YDSTIE: Right. And Mr. Geithner asked her for her papers when she was hired. They expired three months before her employment ended. She subsequently got a green card and apparently, Geithner paid all the required taxes on her employment.

BLOCK: And the response from the Obama campaign to all this?

YDSTIE: Well, Robert Gibbs, Mr. Obama's spokesman, said that upon learning of his mistakes, Geithner quickly addressed them, so his record of serving his country with honor and distinction shouldn't be tarnished by this.

BLOCK: OK. NPR's John Ydstie, thanks so much.

YDSTIE: You're welcome.

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Treasury Nominee's Tax Returns Scrutinized

Timothy Geithner i i

Timothy Geithner, President-elect Obama's pick for Treasury secretary, watches as Obama speaks after a meeting with members of his economic team last week. Mandel Ngan/AFP/Getty Images hide caption

itoggle caption Mandel Ngan/AFP/Getty Images
Timothy Geithner

Timothy Geithner, President-elect Obama's pick for Treasury secretary, watches as Obama speaks after a meeting with members of his economic team last week.

Mandel Ngan/AFP/Getty Images

Timothy Geithner, President-elect Obama's nominee for Treasury secretary, failed to pay tens of thousands of dollars on his tax returns and employed a housekeeper whose legal immigration status lapsed while working for him. That's according to the Obama transition team and documents released Tuesday by the Senate Finance Committee, which is vetting Geithner's nomination.

Geithner admitted to making a mistake in his personal tax returns from 2001 to 2003. He learned of the error on his returns back in November, when he was being vetted for possible nomination to the Obama Cabinet. The mistake resulted in a $34,000 shortfall in his taxes.

The Obama transition office says the delinquent taxes have been paid. Obama spokesman Robert Gibbs describes it as a common mistake on a tax form.

Despite the glitch, Gibbs said that Geithner is the right person to help lead the economic recovery during challenging times.

"He's dedicated his career to our country and served with honor, intelligence and distinction," Gibbs said in a statement. "That service should not be tarnished by honest mistakes, which, upon learning of them, he quickly addressed."

The taxes in question related to Geithner's employment with the International Monetary Fund from 2001-2003. The IMF doesn't withhold money for U.S. taxes, but it adds the approximate amount to the employee's pay, and then the employee has to forward tax payments on to the IRS, according to the papers released by the Senate.

During his time with the IMF, Geithner was required to pay both Social Security and Medicare taxes for himself as both employer and employee. It appears that Geithner forwarded some tax payments but not others. For instance, he owed Social Security tax to the U.S. government. He did forward the employee portion to the IRS, but did not send the portion normally paid by the employer, which he was also supposed to do.

The IRS had previously examined Geithner' taxes for 2003 and 2004, according to the documents, and he had agreed to pay additional amounts, but the IRS waived penalties. The records show some other adjustments and amended returns filed by Geithner for other years, too.

Geithner is currently president of the Federal Reserve Bank of New York.

Separately, Geithner employed a part-time housekeeper whose immigration papers expired in the last three months she worked for him. She later received a green card restoring her legal status. Geithner apparently paid all the required employment taxes.

It's unclear how the problems with his tax returns will affect Geithner's chances for confirmation. Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and ranking Republican Charles Grassley of Iowa issued a joint statement Tuesday saying the panel would continue to investigate the matter. But given that the economy is in the tank and that Geithner — considered a financial whiz by many — has an otherwise sterling reputation, the revelations may not be significant enough to derail his prospects of becoming the next Treasury secretary.

Still, a new date has not been set for Geithner's confirmation hearing, which had been scheduled for Thursday but was postponed.

With reporting by Don Gonyea, Maria Godoy and John Ydstie.

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