Althouse: Tim Geithner — does he belong in the Cabinet or the prison?

January 15, 2009

Tim Geithner — does he belong in the Cabinet or the prison?

Background: here.

AND: You know, it's patriotic — and easy! — to pay your taxes:

94 comments:

Kylos said...: Signing a form acknowledging that you understand that the reimbursement you received was an allowance for your self-employed portion of FICA and then pocketing the money doesn't sound like an accident to me. You can claim ignorance when you're caught, but I'm not going to believe it.; 1/15/09, 10:49 AM
Lem Vibe Bandit said...: Linda Chavez was sacked for a lot less than this..

Oh, this is change allright.; 1/15/09, 10:51 AM
Kylos said...: Obama needs to dump him or he'll only be encouraging "accidental" tax fraud.; 1/15/09, 10:51 AM
Bissage said...: One of the nice things about having a black man as President is the fact that his hair cuts are a lot cheaper.; 1/15/09, 10:57 AM
Kylos said...: "But you've stlll got to pay taxes, everybody has to pay taxes."

"It's like a gift. It's tax free. You don't have to pay any taxes."

"Everybody's got to pay taxes. Even businessmen that lie and cheat and steal from everyday folks got to pay taxes. Everybody knows that."; 1/15/09, 10:58 AM
William said...: With all the modern wonders of telecom, I see no reason why one fate should exclude the other. Tim Geithner could profitably serve his country as Treasury Secy from a prison cell...To catch a thief. I would feel uncomfortable having an honest man in a regulatory position on Wall St. It's like putting a chicken in the fox warren to teach them table manners. Perhaps Madoff could be recruited to replace Cox as head of the SEC. Madoff seems to have been the only one who understood what was going on.; 1/15/09, 11:04 AM
Anonymous said...: Just proves how far into wingnuttia Ann's commenters are.

The IRS knows this is a common error (50% of Americans living abroad make this error) - yet Ann's commenters thinks he belongs in jail, simply because he listened to his accountant (who told him he didn't need to pay social security tax).; 1/15/09, 11:08 AM
Hoosier Daddy said...: There is this thing called Turbo Tax and it really works great.; 1/15/09, 11:10 AM
SteveR said...: Neither; 1/15/09, 11:10 AM
Swifty Quick said...: It's not a matter of him belonging in prison, it's just that he doesn't measure up to being Secretary of the Treasury.; 1/15/09, 11:10 AM
Anonymous said...: I live abroad and I'm having a huge accounting firm do my taxes. I plan on paying exactly what they tell me I should pay. I paid Social Security taxes twice last year - and I have no idea if that's correct, or if I get a refund for it.; 1/15/09, 11:11 AM
Hoosier Daddy said...: Just proves how far into wingnuttia Ann's commenters are.

DTL it's only because you singlehandedly tip the scales of moonbattines that we are required to band together to restore balance to the Force.; 1/15/09, 11:13 AM
Anonymous said...: Wrong Hoosier Daddy. I know you've never ventured beyond the shores of the U.S.A., but Turbo Tax does not work if you are employed abroad. You have zero clue how complex taxes are when you work outside the United States.

You pay taxes in the country you live in. Part of that can be deducted and part of it can't. Then of course you don't pay state or local income taxes, but you do pay state or local income taxes for any investment income you might have from where the money is invested. Of course you might have money invested in foreign bank accounts as well. And then the AMT comes into play, and you have to figure out which part of your income (both foreign and local) applies there. Not to mention any dependents you might be supporting. The Mom in Florida and the kids in England. Which ones can be counted as deductions?

Like I said - you just don't get it.; 1/15/09, 11:15 AM
Expat(ish) said...: My wife, who is a liberal Canadian (pause) and has never met a gov't program she doesn't like thinks that Geitner is unqualified b/c of this. She also thinks Bill should stay home and service Spitzer's leftovers.

I disagree only in that I think Hilly is unqualified to be Sec/State. And the gov't spending part.

Luckily for Gietyboy the press is playing this nice.

Also, Holder: bleh.

-XC; 1/15/09, 11:16 AM
Anonymous said...: That's right Hoosier Daddy. I don't think gay people should be imprisoned for having sex in the privacy of their own homes. You do. But that makes me a moonbat in your book. It also makes you a bigot.; 1/15/09, 11:17 AM
she said: said...: Is 30/40 grand prison worthy? Really? A little rediculous I'd say.

And I've been paper audited 2 years in a row. I don't cheat on my taxes. The IRS is much more friendly these days, but they can still take everything you own. If they want to.; 1/15/09, 11:17 AM
Kylos said...: Downtown, the IMF helpfully explains the situation to you on your tax reimbursement form. Any mediocre accountant (reasonably intelligent taxpayer, even) would recognize that receiving the reimbursement means you have to pay the taxes it was meant to reimburse. My feeling is a good portion of that 50% of overseas citizens also magically "misunderstood" their obligations.

Claiming a misunderstanding may help one avoid prosecution by the IRS, but when you're going to be heading Treasury, claiming misunderstanding of such simple concepts shows basic ignorance in your field at best, or a duplicitousness that has no place in government at worst.; 1/15/09, 11:18 AM
Anonymous said...: I paid Social Security taxes in full in January 2008 when I resided in New York. When I moved abroad, I started paying them all over again.

Since you're all tax experts - is that right or wrong?; 1/15/09, 11:19 AM
Anonymous said...: Wrong Kylos. Most Americans are used to paying 50% of their Social Security tax. They are NOT used to paying the employer portion. That's why 50% get it wrong.; 1/15/09, 11:21 AM
Anonymous said...: This comment has been removed by the author.; 1/15/09, 11:21 AM
Anonymous said...: By the way - my accountant said I get 50% of my Social Security taxes back that I paid in 2008 since I live abroad. Is that right or wrong?

I think it's right and I'm not going to question it.; 1/15/09, 11:24 AM
Lem Vibe Bandit said...: Someone not paying taxes here, Bill raking in donations from everybody there, a CIA chief that was the chief of staff to an impeached president...; 1/15/09, 11:26 AM
Michael Haz said...: Neither prison nor cabinet.

If Geithner is smart enough to serve in a Cabinet position, he should be smart enough to properly follow the tax code.

Same reasoning holds for Charles Rangel, by the way.

Let me put this in terms the left-leaning members of the Althouse community might better understand:

If that moron idiot war criminal election stealer fool trogolodyte George W Bush can follow the federal tax code without error, than a super genius really really bright guy with all the best credentials like Mr. Timothy Geithner should most certainly be able to do so with one hand tied behind his back and blindfolded. !!!11!!!OMGs!!; 1/15/09, 11:29 AM
Michael Haz said...: How the left views [insert name of any important domestic or world issue here]:

I don't think gay people should be imprisoned for having sex in the privacy of their own homes. You do. But that makes me a moonbat in your book. It also makes you a bigot.; 1/15/09, 11:35 AM
Meade said...: Before he belongs in prison, doesn't he need to be convicted of a crime? Just as, he doesn't belong in the Cabinet until Congress confirms his nomination.

Does anyone here know if it's true that, by law, paying income tax is a "voluntary" and not a "mandatory" act?

And doesn't committing tax fraud require actual lying to the state or federal government agency?; 1/15/09, 11:39 AM
Swifty Quick said...: Most Americans are used to paying 50% of their Social Security tax. They are NOT used to paying the employer portion. That's why 50% get it wrong.

I've been self-employed since 1980 and I know first-hand that if you're self-employed this bit of news comes at you pretty quickly. One might suggest Gaithner didn't know he was self-employed, except the fact that the IMF informed him point blank that he needed to pay these taxes and even paid him an extra sum to cover this expense would belie that.; 1/15/09, 11:41 AM
Ann Althouse said...: If you are self-employed, you get to the part of the form -- or the computer program -- where this tax is demanded. I'd like to hear the explanation of how this can be a mistake. I don't want to just hear that anybody can make a mistake and taxes are hard.; 1/15/09, 11:48 AM
I'm Full of Soup said...: dtl:

Self-employed filers (1099 contractors) can claim a deduction for 50% of their self-employment tax.

I suspect that is what your acct told you. It is deduction not a credit so you don't get it all back.

I don't know if this tax treatment is the same for those who live abroad.; 1/15/09, 11:49 AM
Bruce Hayden said...: Let me suggest one reason that this looks bad to some of us. BHO has proposed tax increases on the rich and tax refunds for the rest in order to spread the money around. But what this looks like is that taxing the rich only applies if the rich are Republicans, and that the rich Democrats, at least those near the center of power, are exempt.

And, of course, he will be in charge of the agency that collects all these taxes from the rich Republicans and Independents.; 1/15/09, 11:51 AM
I'm Full of Soup said...: As to Geithner, no jail but his nomination should be withdrawn.

It's time for America to be represened by people who understand the ten's of thouands of laws the idiot Congress feels it is necessary to enact. And they must obey the laws we pay them to enforce.

We need to start keeping it very simple.; 1/15/09, 11:52 AM
Hoosier Daddy said...: I know you've never ventured beyond the shores of the U.S.A.

You be wrong Kemosabe. I have traveled the lands of Holland, France, Germany, Switzerland and Jolly old England.

That's right Hoosier Daddy. I don't think gay people should be imprisoned for having sex in the privacy of their own homes. You do. But that makes me a moonbat in your book. It also makes you a bigot.

When in the hell did I ever suggest that gays be imprisoned for fudgepacking? I could care less.

You really need to stop assuming most people care with who and where you stick your member.

I sincerely hope your new mother/fatherland of choice has universal mental health care.; 1/15/09, 11:58 AM
Tank said...: I thinking Geithner and Rangel in a cell together.; 1/15/09, 11:59 AM
An Edjamikated Redneck said...: And let's not forget that Geithner got a letter from the IRS TWO YEARS AGO, and basically ignored it, until a couple of days before being named by Obama, when he magically decided to fork over the bucks.

To me, that smells worse than actually making the 'error'.; 1/15/09, 12:00 PM
traditionalguy said...: The issue here is the "Risky Behavior" taken by a man who will be giving others his advice when risks are on the table. There are only two approaches known to the handling of "Other People's Money". One accepts the burden of integrity and stays within the standard of no appearance of wrong doing. They welcome audits. The IRS sees us as handling the money belonging to the United States. So this man may be a normal Democrat, but he is the other type and is not qualified to handle anybody else's money without constant surveilance by auditors.; 1/15/09, 12:05 PM
Ralph L said...: until a couple of days before being named by Obama, when he magically decided to fork over the bucks.
I read it wasn't until they(O Team) asked him to (that's for 2001&2).; 1/15/09, 12:09 PM
Donna B. said...: If it was a mistake, one of those honest kinds, then he's stupid.

If it wasn't a mistake, then he cheated on his taxes and was stupid enough to not pay up when he got caught.

The question is whether he's a stupid crook or just plain stupid.; 1/15/09, 12:13 PM
garage mahal said...: It's time for America to be represened by people who understand the ten's of thouands of laws the idiot Congress feels it is necessary to enact.

Starting now!; 1/15/09, 12:20 PM
Rohan said...: If you are self-employed, you get to the part of the form -- or the computer program -- where this tax is demanded. I'd like to hear the explanation of how this can be a mistake. I don't want to just hear that anybody can make a mistake and taxes are hard.

But he wasn't self-employed. My understanding is that he was an employee of the IMF, but was *treated* as if he had been self-employed for tax purposes only.

Which, kind of honestly, seems excessively complex to me.; 1/15/09, 12:24 PM
former law student said...: If Geithner is smart enough to serve in a Cabinet position, he should be smart enough to properly follow the tax code.

Perhaps he couldn't handle the cognitive dissonance between working for the IMF and being self-employed. Was he the sole proprietor of the IMF?

Apparently his employer deducted his federal income tax, giving him a W2, not a 1099 at the end of the year, so there would be no annual trigger to remind him.

Maybe he thought his job with the IMF exempted him from paying social security tax, like being a nun. We all have to sign an assload of papers on the first day of starting a new job -- he might not have paid the least bit attention to the one that said he'd have to pay FICA on his own.

One of the regular Althouse posters got in trouble for not paying his quarterly estimates, after switching from being an employee to an independent contractor, so I think we could take a charitable view here.; 1/15/09, 12:31 PM
sean said...: I'm with downtownlad (which isn't usually the case). This is a very complex situation, to be employed (in a common law sense) by a foreign organization which treats you as self-employed for U.S. tax purposes. I think it would be easy to get wrong, as (apparently) about half of the people in that situation do.

I hope Prof. Althouse realizes that turbotax is not infallible. If your situation is complex, the program can be wrong. For instance, some years ago, the program went wrong in the AMT calculation when I had passive losses from a rental property plus passive income from non-rental activity. So if Prof. Althouse has anything like that going on, I hope she rechecks the program's work line-by-line with the Code and regs in hand.; 1/15/09, 12:35 PM
Sprezzatura said...: The point downtown accurately noted does seem relevant as evidence that it is possible to mess this up, as stated in the NYT:

"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."

And, I'm too lazy to really look into this. But, did the IMF forms signed by Geithner refer only to checks he specifically received to pay for only payroll taxes usually paid by employers? Or, were these larger reimbursements meant to cover other tax obligations (e.g. state/fed/employees share of payroll taxes) as well as the payroll taxes usually paid by the employee? Or, were these IMF reimbursements meant to cover some combination of tax obligations, but not all of them?

Just, looking at the amounts he needed to pay back (w/o penalties and interest) and assuming he made north of $100k per year, and assuming a total payroll obligation of 15%, it's possible that he did pay half of the total payroll taxes that were due, so he may have applied the funds from the IMF to his payroll taxes.

The NYT seems to indicate that the IMF only reimburses employees for the employer part of the payroll taxes, so it is possible that Tim did send this IMF money to the IRS, thereby thinking his obligations were met (after all, he would have sent the money to the IRS, but he didn't chip in his own part.) And, supposedly Geithner did have a green light from his accountant regarding his exemption from self employment taxes. So, as long as he's paying the IRS more than his IMF reimbursement it's not impossible to imagine that he thought he had properly forwarded the reimbursement to the IRS.

Not that Geithner didn't make mistakes, but it may not be correct to say he pocketed the IMF money w/o sending this amount of money to the IRS. And, it does seem that it's (statistically) a flip of a coin situation for folks in his position to get this right--so these folks should expect audits, the IRS knows they are a target rich environment.; 1/15/09, 12:35 PM
Sprezzatura said...: P.S.

I don't care much about this issue.

Maybe it's because I'd rather see a Treasury Secretary sooner than later because of our circumstances economic.

Maybe it's because I like the KoolAid.

Maybe it's because I look at taxes as a yearly battle of wits--a sport--myself.; 1/15/09, 12:38 PM
Dust Bunny Queen said...: I'd like to hear the explanation of how this can be a mistake.

It can't be a mistake. Either he or his tax preparer (I assume he had one, since only a fool in his position would try to do his own taxes).... cheated. Period.

If he wasn't smart enough to be able to figure out his own taxes or hire a competent tax professional, then he isn't competent to be elevated to a Cabine position.; 1/15/09, 12:38 PM
sean said...: I'm not sure if it's true, as one of the commentators said, that the IMF issues W-2s, not 1099s, but, if it is, I'm quite sure that Turbotax won't pick up your SE tax obligation. You will have to override the program and enter that liability by hand.; 1/15/09, 12:45 PM
chuckR said...: In 1983, my wife, without the benefit of a single accounting course, somehow managed to make state and federal income tax and payroll tax withholdings, plus make the necessary unemployment and disability deposits all for our son's nanny. We were, after all, her employer.
Now my wife is a very smart and diligent person, but isn't a SuperFantastic Master of the Universe like Geithner supposed to be all that plus educated in the ways of the financial world? I think my wife is something Mr. Geithner isn't - honest.

DTL - Payroll tax is based on equal 'contributions' by employer and employee. Excess employee contributions in a year are refunded. Contributions from two or more employers of said employee are not refunded. Been that way for a long time. This happened to me in 1987 and I don't think its changed. As a self-employed person, you pony up both sides of the 'contribution', but have an offsetting expense of the employer half on your personal return. Please consult DBQ for a more complete answer.; 1/15/09, 12:50 PM
Anonymous said...: Let's recap:
formerly employed by The International Monetary Fund,
currently President of the Federal Reserve Bank of New York,
soon to be Secretary of the Treasury of the United States, but can't correctly file his own taxes ?

He's the prefect book-end with the new Sec of State that has a husband that accepts millions from any foreign interest that can pony up.

There's a wonderful symmetry at work here.; 1/15/09, 12:51 PM
I'm Full of Soup said...: DBQ:

He did his own taxes for several of the years in question.

I have done my own taxes for most of my life and I'd put my knowledge and intelligence up against many of the past and future Cabinet critters.

Don't forget these same Cabinet members and muckety-mucks are the dumb dolts who made the tax system into a ridiculously complex matrix that is supported, for the most part, by the voluntary compliance of the citizenry.

FYI - last time I used the term "voluntary compliance" re income taxes, all hell broke out.; 1/15/09, 12:54 PM
former law student said...: I'm not sure if it's true, as one of the commentators said, that the IMF issues W-2s, not 1099s

Apparently so. Read the quotes from Bill Gruen, towards the end of the article here:

http://www.nytimes.com/2009/01/15/us/politics/15tax.html?ref=business; 1/15/09, 12:55 PM
michaele said...: The jail or cabinet position is too extreme for me but I sadly come to the conclusion that the man is not worthy of being Sec. of the Treasury. He is supposed to be sooo smart...the best of the best...and this failure to either fully understand or comply with tax rules doesn't give me confidence. Good lord, the complexity of our country's and the world's financial difficulties means we can't take any chances on the Sec. of the Treas.; 1/15/09, 12:58 PM
Original Mike said...: At the very, very least, Geithner should use this as a springboard to fix a very big problem: tax complexity. Consider it penance.

The complexity of the tax code is obscene.; 1/15/09, 1:09 PM
Meade said...: 1jpb said...
"P.S.
I don't care much about this issue.
Maybe it's because I'd rather see a Treasury Secretary sooner than later because of our circumstances economic.
Maybe it's because I like the KoolAid.
Maybe it's because I look at taxes as a yearly battle of wits--a sport--myself."

And maybe it's because you think every blog post is all about you.; 1/15/09, 1:11 PM
Simon said...: I think it's a horrible mistake to set a precedent that amounts to an exclusion from public office of anyone who has ever made a mistake, or who has a past that is in some way less than angelic. A chequered past is one thing, but we live in deeply serious times, and it is deeply unserious to allow a flap over some good faith mistakes and some chump change in late taxes to derail the appointment of a cabinet official.

If what Geithner has done is considered serious or even criminal, the natural response - particularly for Republicans - should be to take it as an indictment not of Geithner, but rather, of that labyrinthine bog of a tax code. I trust, however, that when he is confirmed, Geithner will reflect on his situation in his direction of the IRS. It would be unseemly for a man still brushing cobwebs from his own clothes to allow his staff to chase those who blunder innocently into the web.; 1/15/09, 1:12 PM
reader_iam said...: No jail. Unsure about Treasury Secretary.

At least part of my income has been as a non-employee (call it what you will) since 1986 and all of it has been since 1994. I've paid both sides of social security on the relevant income all that time without fail, both when I didn't have an accountant and since the time I have had one. FWIW.; 1/15/09, 1:13 PM
The Drill SGT said...: My wife used to work for the IRS, and the employees won’t be amused. As a condition of employment you had to agree to tax audits and every year they ran a compare on April 16th between “returns filed” and “payroll names”

What he did was deliberate fraud. The facts
1. employed at IMF 2001, 2002, 2003, 2004
2. warned at employment that he had to file
3. audited in 2006 on his 2003 and 2004 returns. found out and paid up,
4. but only on 2003 and 2004 and no penalties etc
5 he covered up and failed to amend his 2001 and 2002 returns which he HAD to know were incorrect. Only when he took the job did he try to get straight on those years

Take a look at page 10 of this PDF

http://www.politico.com/static/PPM104_090113_geithner.html

It shows that the IMF provides a "gross-up" to salaries to cover the self employed taxes. The ZINGER for Geithner is that you must apply for it. Geithner applied, he signed the form and the block 10 just above his signature states that he cerifies that his claim for the money is true and that if given the money he will apply it to his taxes. SLAM DUNK GUILTY

he cheated and got caught

Ann, you should update with this file:

http://www.politico.com/static/PPM104_090113_geithner.html; 1/15/09, 1:18 PM
Smilin' Jack said...: Dump Geithner.

In these difficult times, we need a Treasury secretary who's not only smart enough to cheat on his taxes, but smart enough to get away with it.; 1/15/09, 1:31 PM
Donna B. said...: Someone above mentioned that when using TurboTax, the software would not pick up that he owed SS tax if a W-2 was entered.

If that's the case, then forget Turbo-Tax because every computer tax program I've ever used, picks up on that kind of discrepancy and demands a response.

Geithner didn't make a simple mistake. He cheated.

Someone else pointed out that we can't expect our public servants to have spotless pasts and that's true. But when the spots in the past bear directly on his ability to function in the office he's being appointed to, it matters a great deal.

This is a heckuva lot worse than hiring a prostitute.; 1/15/09, 1:33 PM
I'm Full of Soup said...: Drill Sgt:

You would be one hell of a successful prosecutor.; 1/15/09, 1:33 PM
Hoosier Daddy said...: Well for DTL and the rest of the Obama disciples it boils down to this. 1) He cheated on his taxes or2) it was an honest mistake which leads us to 3) In either case, he's obviously unqualified for the job.

Try again.; 1/15/09, 1:42 PM
Balfegor said...: The jail or cabinet position is too extreme for me but I sadly come to the conclusion that the man is not worthy of being Sec. of the Treasury. He is supposed to be sooo smart...the best of the best...and this failure to either fully understand or comply with tax rules doesn't give me confidence. Good lord, the complexity of our country's and the world's financial difficulties means we can't take any chances on the Sec. of the Treas.

Look, the man is head of the New York Fed. As such, given the way things have shaped up, he's going to be pretty closely involved in setting financial policy whether he's the Secretary of the Treasury or not. As, in fact, he's been involved over the past few months, working with Bernanke and Paulson to craft the Bush administration response to the financial crisis. The man is not an unknown quantity. For better or for worse, there's not a huge mystery about his abilities or what he's going to do in office -- it's going to be basically indistinguishable from what we've seen so far.

Honestly, I don't see the point in denying him confirmation. Is it like there's a different candidate for Treasury Secretary waiting in the wings, who'll do something different? Larry Summers is the spare, I suppose, but what's he going to do that's different? The only point in embarassing Geithner here is to smack Obama around a little in public, to show him who's boss, perhaps, or perhaps in the vain hope that the press will wake up and realise that Obama has not had an "unusually smooth" transition, but rather the reverse. It's not actually going to improve policymaking out of the Obama administration.; 1/15/09, 1:54 PM
Anonymous said...: Actually, his position as head of the New York Fed is another strike against him. Sure he is familiar with the system, but he essentially presided over the center of the self-destruction of the U.S. financial system without lifting a finger until it was too late.; 1/15/09, 1:58 PM
Hoosier Daddy said...: As, in fact, he's been involved over the past few months, working with Bernanke and Paulson to craft the Bush administration response to the financial crisis.

I'm not sure that's exactly a ringing endorsement either.; 1/15/09, 2:04 PM
Balfegor said...: Actually, his position as head of the New York Fed is another strike against him. Sure he is familiar with the system, but he essentially presided over the center of the self-destruction of the U.S. financial system without lifting a finger until it was too late.

That's a fair point. And the fact that he's basically been the number three man in crafting the Bush II response is not a huge mark in his favour either. But I have two responses:

(1) Even if he's not treasury secretary, he's still going to be president of the NY Fed (his current 5-year term started in March 2006) -- so he's still going to have the same major role in policy as he has now. The difference in what kind of policy comes out of the new administration, if you keep him out of the treasury secretary position, is going to be marginal.

(2) Who's the alternative? How is it better?; 1/15/09, 2:15 PM
Donna B. said...: If Larry Summers is the alternative...; 1/15/09, 2:21 PM
Balfegor said...: If Larry Summers is the alternative...

Then we'll have people beating up the nominee because he presided over Glass-Steagal and the deregulation of the derivatives markets back when he was Treasury Secretary the first time -- those being two Clinton-era reforms that lots of commentators blame, fairly or no, for the current mess.; 1/15/09, 2:38 PM
The Drill SGT said...: The difference in what kind of policy comes out of the new administration, if you keep him out of the treasury secretary position, is going to be marginal.

One can argue it matters to:

1. IRS employees
2. Taxpayers
3. Potential tax cheats

That was of course the reason they went after Martha Stewart. She did of course know the rules, being among other things:

1. a former stock broker
2. an Officer of a NYSE listed firm
3. a Director of the NYSE Board.

pour encourager les autres; 1/15/09, 2:45 PM
sean said...: Donna B, I said "I think" that Turbotax will not pick up on the failure to pay the employer's portion of the SS taxes. I don't see how it would, because there isn't even a box on the W-2 for the employer's portion. I will have to try it tonight, i.e., report that I have a W-2, see if the program asks me if I am classified as self-employed for U.S. tax purposes notwithstanding that I have a W-2 (I'm pretty sure it doesn't) and what it does if I report no SS taxes paid. I'm pretty sure it just makes you pay the employee portion. Who would think to pay the employer portion? I practiced tax law full-time for five years and I wouldn't have known that there are people who are common law employees receiving W-2s who are classified as self-employed for U.S. federal income tax purposes, so I doubt that the Turbotax programmer did. As I say, I do know from experience that the Turbotax programmer did not properly allow for a taxpayer with passive losses from rental activities and passive income from other activities who is subject to alternative minimum tax.; 1/15/09, 2:51 PM
MayBee said...: Why the talk about living abroad? Geithner didn't live abroad when he worked for the IMF.

downtownlad- if you changed employers when you moved abroad, your new employer would have started taking SS taxes out of your paycheck. When you file your taxes, you will be able to get a credit for the money you paid in excess.

The PDF The Drill Sgt linked is a must-read if people want to understand fully what happened here. There's no reason to guess at what he was told by the IMF or how their tax system worked.; 1/15/09, 2:54 PM
Balfegor said...: One can argue it matters to:

1. IRS employees
2. Taxpayers
3. Potential tax cheats

Fair enough. But the people in category (1) do not have my sympathies; the people in category (2) are, I'm sure, mostly already aware that the government has made the tax code extremely difficult to navigate, such that it should come as little shock that even clever people who are not tax specialists find that they have got their taxes wrong; and what are the people in category (3) going to do? Argue that the IRS is estopped from suing tax cheats because their boss neglected to pay his social security tax?; 1/15/09, 2:55 PM
Balfegor said...: downtownlad- if you changed employers when you moved abroad, your new employer would have started taking SS taxes out of your paycheck.

Not all foreign employers are secretly US corporations in disguise. There are lots of companies that don't bother withhold US taxes. And I'm not sure why they should trouble themselves to -- does the US government go after foreign companies in foreign countries because they don't withhold SS for one or two Americans they have employed? That would be a pretty strong disincentive ever to hire Americans if you can avoid it.; 1/15/09, 2:59 PM
MayBee said...: Balfegor- DTL specifically said he started paying SS taxes again after moving abroad, when he'd already paid them in full for the year.; 1/15/09, 3:03 PM
I'm Full of Soup said...: The tax software should only be interested in the portion of employee-paid FICA & medicare taxes if your total earnings exceeded the FICA ceiling and you had more than one employer.

I don't believe software like Turbo Tax concerns itself with whether your employer paid its correct share of FICA/ medicare taxes. That is the job of the IRS aka Tim Geithner.; 1/15/09, 3:03 PM
Balfegor said...: I thought from the context that he was paying the taxes (analogous to what Geithner was supposed to do). But you may be right.; 1/15/09, 3:04 PM
MayBee said...: I took from his use of "Social Security Tax" as opposed to "Self Employment Tax" that it was through his employer. I could be wrong, too.; 1/15/09, 3:11 PM
Icepick said...: The Social Security taxes aren't the only issue. The Miami Herald reports:

One of the more egregious errors was that Geithner, over three different tax years, claimed that expenses for the summer camps he'd sent his children to qualified for the child and dependent-care tax credit. This credit is for working parents with children younger than 13 who send them to preschool or after-school care. IRS documents and commercially available tax software clearly define what qualifies.

"That's one anyone who has kids and has filled out that form knows that it's wrong. That's really odd," said Paul Caron, a prominent tax-law expert and associate dean at the University of Cincinnati College of Law.

Taking that into account it looks more like he intentionally cheated on his taxes.; 1/15/09, 3:28 PM
bearbee said...: The IRS is much more friendly these days, but they can still take everything you own. If they want to.

"The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin."
— Mark Twain

Henry Buck said...
Actually, his position as head of the New York Fed is another strike against him. Sure he is familiar with the system, but he essentially presided over the center of the self-destruction of the U.S. financial system without lifting a finger until it was too late.

This seem more the critical issue regarding his confirmation hearing.

Federal Reserve Bank of New York and What We Do

Support financial stability in the U.S. and abroad
The New York Fed's supervisory activities are designed to ensure a safe and sound banking system....

He has been President since 2003.; 1/15/09, 3:35 PM
Revenant said...: I vote "neither".

He paid the fines, and the IRS seems satisfied. No need for jail time.

But it is pretty damned obvious that he deliberately avoided paying the tax, which means he shouldn't be anywhere near the government.; 1/15/09, 4:15 PM
sean said...: Outis, as I understand, day camp qualifies for the credit, but sleepaway camp does not. This is neither logical nor obvious to me, so I don't exactly consider it tax fraud to get it wrong.; 1/15/09, 4:16 PM
blake said...: Althouse cleverly gives us only the two extreme choices, rather than the more moderate choice of "he should be executed along with all the other assholes who would presume to influence our behavior with tax codes".; 1/15/09, 4:20 PM
Bruce Hayden said...: I think it's a horrible mistake to set a precedent that amounts to an exclusion from public office of anyone who has ever made a mistake, or who has a past that is in some way less than angelic. A chequered past is one thing, but we live in deeply serious times, and it is deeply unserious to allow a flap over some good faith mistakes and some chump change in late taxes to derail the appointment of a cabinet official.

I agree that it would be a mistake to exclude qualified people from appointed office if they have a single blemish on their record.

However, I would suggest that there are some failings that are too close to the center of someone's responsibilities. So, I would consider failing to pay taxes much worse for the Sec. of the Treasury or the Chair of the House Ways and Means Committee than for, say, the Sec. of the Interior. On the other hand, if they caught in a sex scandal, then fine. Another that I find questionable is the apparent large scale acceptance of foreign contributions to the library of the presumptive Sec. of State. Again, a sex scandal would be just fine, but not taking money from foreigners (and, indeed, a tax scandal wouldn't be that much of an issue here for me, since the Sec of State doesn't have the IRS under her).; 1/15/09, 4:25 PM
Cedarford said...: I really don't care about his transgressions.

If he can limit my life savings damages to 20% from 40% thanks to wealthy and harmful financiers running Wall Street, Globalism, Free Trade! for Freedom-Loving Owners.....I am happy with his appointment...despite the chickenshit.

Lincoln was warned about Grant. From the middling classes, rude and uncouth, a warrior but failed merchant, and a drunk.

Lincoln said, "Despite that, does he help win battles, and is the best person to win future battles, and end this??"

On getting a "yes", Lincoln went with Grant.

Geithner is Grant. we flirt with silly scandals at collective risk.; 1/15/09, 4:30 PM
Shanna said...: he listened to his accountant (who told him he didn't need to pay social security tax).

What kind of dumb ass accountant thinks you don’t have to pay your payroll taxes when you’re self employed? If that’s true, that guy should lose his license. If it’s true.

the IMF helpfully explains the situation to you on your tax reimbursement form.

This is the part that makes me most suspicious. And it seems pretty obvious that he didn’t bother to pay 2001/2002 taxes because the IRS didn’t make him, not because it wasn’t obvious he owed it.

To me, that smells worse than actually making the 'error'.
Yes.; 1/15/09, 4:37 PM
Joe said...: Some people are missing the point with tax software. While it won't pick up that your employer didn't pay their share, it will pick up that you didn't pay yours and that's what Geithner didn't do. He didn't merely underpay his FICA, he paid none. You have to be an utter moron to believe you can do that, especially when told you have to and sign a contract that you will AND have the amount highlighted on your paycheck. Any CPA who says otherwise should have their license pulled.

Yes, the tax code is extremely complicated--try figuring out categories for business deductions--but this part of it isn't. The ONLY complexity with FICA is knowing what the caps are and making sure if you worked for more than one company that you inform your payroll department so they can make the proper adjustments. (Most tax programs will flag an error if you overpay your FICA.)

Now, if you want complicated, become a business and figure out how to do EIC credits. Or, if you have college aged kids that you help with tuition, try to figure out what credit/deduction to take without a computer program. (Interestingly, a few years ago Congress made a last minute change and the free TaxAct was the only software to pick the right one and calculate it correctly.); 1/15/09, 5:16 PM
Joe said...: On the merits, does anyone think Geithner has done a good job with the current bailout? It's been a complete scam--the American people were duped out of $350 billion and are about to be duped out of another $350 billion plus.

The objective fact is TARP is a failure and Geithner is part of that failure. He deserves the boot from the Fed, not a promotion.

(Duped may not even be the right word; $350 billion were stolen from the American people and flushed down the toilet. Now Congress wants to again check the suction of the toilet. News flash; when you hand out free money, someone will take it.); 1/15/09, 5:21 PM
Original Mike said...: If he can limit my life savings damages to 20% from 40% .....I am happy with his appointment...despite the chickenshit.

I agree. IF he can. But why do we think he's the Messiah?; 1/15/09, 5:28 PM
I'm Full of Soup said...: Cford:

Do you have a good reason to believe Geithner is a future star performer?; 1/15/09, 5:53 PM
I'm Full of Soup said...: Hey Revenant:

Welcome back - we missed you.; 1/15/09, 5:54 PM
Revenant said...: Thanks, AJ.; 1/15/09, 6:50 PM
former law student said...: What kind of dumb ass accountant thinks you don’t have to pay your payroll taxes when you’re self employed?

He wasn't self-employed, he worked for the IMF, an international organization which is somehow exempt from paying FICA and Medicare taxes for its US workers.; 1/15/09, 6:56 PM
Meade said...: It IS Revenant! Great!. And Outis too!; 1/15/09, 7:20 PM
Anonymous said...: Should we be concerned that he received a reimbursement for the taxes he didn't pay? Signed a form saying that he paid all of them.

He received money. For taxes he didn't pay. For several years.; 1/15/09, 8:27 PM
Icepick said...: Outis, as I understand, day camp qualifies for the credit, but sleepaway camp does not. This is neither logical nor obvious to me, so I don't exactly consider it tax fraud to get it wrong.

All I can do is once again quote the Herald:

"IRS documents and commercially available tax software clearly define what qualifies.

"That's one anyone who has kids and has filled out that form knows that it's wrong. That's really odd," said Paul Caron, a prominent tax-law expert and associate dean at the University of Cincinnati College of Law."; 1/15/09, 9:47 PM
Anonymous said...: There is nothing complicated or arcane about this. The man willfully cheated on his taxes.

All ordinary income is taxed for social security and medicare. There are no deductions or allowances to make an adjusted gross income for these taxes. If you work for an employer who does not withhold and remit to the government those taxes you are responsible for those taxes.

Whether one lives here or abroad, you are taxed on the entirety of the gross ordinary income up to the maximum social security level for the given year, the rest is subject to medicare tax to the last dollar of ordinary income.

This year: social security @ 12.4% up to $104,000 and 2.90% on every dollar of ordinary income. The self employed pay the rates I mentioned and those who are employed by a US taxpayer pay half the rate/amount and the employer the other half.

Any and all tax credits and other allowances for working overseas are for income tax purposes, not for payroll tax purposes. One would think the presumed head of the IRS would know that much. Geithner is either a blithering idiot or more likely figured he could get away with this. Either way, unfit for the job.

DTL its very simple, every dollar you earn of ordinary income is subject to payroll tax. The trick is to get paid with a revenue stream that isn't considered ordinary income by the government. Any tax program could figure it out for you as far as payroll taxes are concerned.; 1/16/09, 3:38 AM
Cedarford said...: AJ Lynch said...
Cford:

Do you have a good reason to believe Geithner is a future star performer?

Absolutely none. Just people in both Parties expressing belief that he is perhaps the best person for the job out there. Besides him, I thought Romney, but no way would Axelrod ever let Obama appoint him.

That's all Lincoln had with Grant - a string of small victories, then Vicksburg showing he was the one with the talent Lincoln was looking for and more than enough reason to blow off Grant's many scandals. Grant was Lincoln's best shot at fixing things with the Army of the Potomac and winning fast. He was not a guarantee.; 1/16/09, 7:44 AM
Nichevo said...: dtl: Yes, I know the answer to your question.

But I'm not going to tell you, because I'm hoping you get it wrong, and are sent to prison for a long time, with lots of ass-pounding cellmates.

--Because I love you, man, and want the best for you!

;>

As for Geithner: maybe he is a stalking horse for Summers. G rejected, Summers should be a shoo-in with the Senate, and now Obama can have his woman-mocker in place like he wanted all along. Simple, no?

SRSLY, is a little accountability too damn much to ask from our high officials? I know we can't get any from Congress so why not take it where we can get it? And think of all those who have gone to the stake for less.

Ni prison ni position.; 1/16/09, 1:20 PM