WASHINGTON — Millions of Americans might be surprised to learn that the man nominated to be the next Treasury secretary — New York Fed president Tim Geithner — did his taxes using the same software they do: TurboTax, a fact revealed in his Senate confirmation hearing last week.
Geithner’s tax returns from 2001 through 2004 have become an embarrassment, if not a stumbling block to his confirmation. A 2006 IRS audit informed Geithner that he had failed to pay self-employment taxes in ‘03 and ‘04, when he worked for the International Monetary Fund as director of its policy development and review department. While being vetted for Treasury secretary late last year, he was told he made the same errors on his ‘01 and ‘02 returns. He calls them “careless mistakes” that he should have caught and has paid $42,702 in back taxes.
It’s an unlikely image: The man charged with leading this nation out of recession — an architect of the $700 billion financial rescue package — hunched over a computer, surrounded by stacks of paper, trying to figure out his taxes, just like the 18 million other working stiffs who bought TurboTax last year.
But the disclosures raise another issue: When Geithner found he owed back taxes for ‘03 and ‘04, and had probably made the same mistakes on his ‘01 and ‘02 returns, why did he wait until confronted by Obama’s vetters to check?
That was the question Sen. Jon Kyl, R-Ariz., tried to get at last week, suggesting Geithner was hoping to ride out the statute of limitations on audits.
“The question is whether it occurred to you before you were nominated or approached to be nominated that, in point of fact, you didn’t have to go beyond 2003 and ‘04 because of the statute of limitations,” Kyl said.
Geithner said: “I did not believe I had the obligation to go back. … I had no occasion to think about it, and I might not have thought about it had I not gone through the vetting process.”
Then there’s this question: Is this TurboTax’s fault?
A resounding “no,” said Fernando Flores, a research assistant at the U.N. Economic Commission for Latin America and the Caribbean. Flores is his agency’s “local tax focal point” — the man who volunteers to help his American colleagues figure out the complicated tax issues involved in working for an international agency such as the United Nations, the World Bank and the IMF.
U.S. workers at such agencies are classified as self-employed contractors, not employees.
“I always thought I was an employee of the IMF,” not a contractor, Geithner said Wednesday, an assumption he now admits was a mistake.
Flores, who has used TurboTax for years, said employees of international agencies are not given W-2 forms. They instead get a statement of earnings and are typically told at hiring that they are responsible for paying their portion of self-employment tax, which Geithner failed to do.
To file an error-free return, Flores said, U.S. citizens must delve into the worksheets used in the software. There, he said, filers are able to override the system and force it to calculate the self-employment tax owed.
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