So what do people make of Treasury Secretary-nominee Geithner's difficulty calculating and paying his taxes? The NY Times correctly flags the thorniest issue - Geithner tripped up on a tricky Social Security issue from 2001 to 2004. In 2006 an IRS audit noted the problem but, due to a three year statute of limitations, only insisted on a correction to Geithner's 2003 and 2004 returns. Geithner complied but did not volunteer to correct his 2001 and 2002 returns until last November, during the vetting process for his Treasury appointment. Thus, Obama's assertion that Geithner made "an innocent mistake" is not wholly accurate - the mistake may have been innocent (or a non-innocent aggressive tax interpretation) when made but stopped being innocent when Geithner amended his 2003 and 2004 returns in 2006:
The more serious questions surround the previously unpaid taxes. The bulk of them were detected in 2006 after an audit by the Internal Revenue Service for 2003 and 2004, and Mr. Geithner paid back taxes and interest then for those years.
In November the Obama vetting team found other unpaid taxes for 2001 and 2002, and Mr. Geithner immediately paid those plus interest when the matter was brought to his attention, transition officials said.
The underpayments all involve Mr. Geithner’s income as a senior official at the International Monetary Fund from 2001 to 2003, including a small payment in 2004 after he had left. Mr. Geithner worked there after leaving the Treasury, where he had risen to under secretary for international affairs in the Clinton administration, and before becoming president of the New York Fed, a post that has put him at the center of the economic crisis.
The I.M.F., as an international organization, does not withhold payroll taxes for Social Security and Medicare from its American employees’ paychecks. Those workers are required to pay the roughly 15 percent tax themselves, as if they were self-employed.
However, the I.M.F. does pay its American workers an amount equal to an employer’s half of the payroll taxes, with the expectation that they will use that to pay the I.R.S. The organization also gives them quarterly wage statements that include United States tax liabilities.
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.
The I.R.S. waived penalties for Mr. Geithner in 2006, according to an account provided by the transition office and the Senate committee. A three-year statute of limitations had precluded the agency from auditing the 2001 and 2002 tax returns, a committee aide said.
Mr. Geithner volunteered to amend the earlier returns and pay the taxes and interest, a total of $25,970, after Mr. Obama indicated that he wanted to nominate him for the Treasury job, according to the account. Mr. Obama announced the nomination in Chicago on Nov. 24, three days after the issue had come to Mr. Geithner’s attention.
That chronology raises the question, however, of why Mr. Geithner did not voluntarily correct the earlier nonpayment of self-employment taxes after the 2006 I.R.S. audit identified the problem for 2003 and 2004.
Fine, it was tricky and he got bad tax advice - not a real resume boost for a former Under-Secretary of Treasury aspiring to the top job, but there it is. However, as of 2006 he knew he had a liability for 2001 and 2002 - where was his check? Was his conscience unruffled by his non-compliance? Or does Geithner have a "Don't ask, don't tell" policy on back taxes?
The housekeeper is much less vexing:
he issue involving a former housekeeper of the Geithner family is separate. The woman was in the country legally and was authorized to work when Mr. Geithner and his wife hired her in 2004, but her employment authorization expired three months before she quit working for them. The issue was discovered by the Senate Finance Committee, not by the Obama team, and it came as news to Mr. Geithner, according to a Democrat who was briefed on the situation.
She was legal when he hired her! Workplace enforcement is an ongoing compliance challenge.