Geithner Failed To Pay Self-Employment Taxes

Tax issues are delaying Senate confirmation hearings for Tim Geithner, President-elect Barack Obama's choice for Treasury secretary. Geithner initially failed to pay a portion of his taxes between 2001 and 2004. He says it was an honest mistake, but a key Republican wants to hear more.

Copyright © 2009 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

STEVE INSKEEP, host:

Some other news now. President-elect Barack Obama's choice for Treasury secretary has run into a problem. Tim Geithner failed to pay more than $40,000 in taxes over a four-year period. This is the guy who's nominated to oversee the Treasury. He's repaid the money, but the misstep has delayed his confirmation hearing, as NPR's John Ydstie reports.

JOHN YDSTIE: Geithner, who until recently was president of the New York Federal Reserve, met privately yesterday with members of the Senate Finance Committee to explain his tax issues and a minor issue concerning a housekeeper's immigration status. After the meeting, Committee Chair Max Baucus of Montana said, quote, "The errors were not intentional. They were honest mistakes." But a spokesperson for the ranking Republican Senator Charles Grassley of Iowa said the senator believes the issues are serious.

Most of the tax problems occurred while Geithner was employed at the International Monetary Fund from 2001 to 2003. The IMF does not withhold U.S. taxes, as most employers do. It does add the approximate amount of the taxes due to the employee's pay, and then the employee has to forward tax payments on to the IRS. It appears that Geithner forwarded some tax payments, but not others.

For instance, he owed Social Security taxes to the U.S. government. He did forward the employee portion to the IRS, but he did not send the portion of the Social Security tax normally paid by the employer, as he was supposed to do. The IRS audited Geithner for tax years 2003 and 2004 and required him to pay additional taxes and penalties, but Geithner did not amend his 2001 and 2002 tax returns until Obama transition officials discovered the problem. Geithner quickly paid the nearly $26,000 he owed. Republican Orrin Hatch of Utah, who serves on the Finance Committee, said the issue should not jeopardize Geithner's confirmation. John Ydstie, NPR News, Washington.

Copyright © 2009 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Treasury Nominee's Tax Returns Scrutinized

Timothy Geithner i i

hide captionTimothy 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

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.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: