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    #1

    New Treasury Secretary

    Typical of TV soundbytes. New Treasury Secretary Timothy Geithner (boss man for the IRS) made a casual mistake on his taxes of $43,000. Congress says this is just a mistake, appointee will pay the tax, and they will ratify this guy.

    99% of the public will hear this. For those of us in the business, we know that somewhere there is a "rest of the story."

    For example, this "oversight" was done on TurboTax. As a tax practitioner, I don't support TurboTax, but I seriously doubt that TT failed to pick this up, and they should not get the blame for this on national TV.

    Secondly, there is, at least on the social security portion, an annual ceiling for Self-Employment tax. How many years of "casual TurboTax errors" would it take to amass a shortage of $43,000? Keep in mind also that self-employment tax is assessed ONLY after his W-2 income SS wages have been subtracted from the annual minimum.

    Thirdly, Geithner has been working in high places for a number of years. How many years has the IRS been turning their heads and ignoring this unpaid SE tax?

    Wonder if Geithner consider a "free pass" for the rest of us??
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    #2
    Just yesterday a client of mine was speaking with a lawyer who is handling a delicate tax matter that I'm helping work out. They were discussing possible penalties & interest, how to pay it, etc. My client told the lawyer that it would be fine with him if he asks the IRS to just give him the same consideration they gave the incoming Treasury Secretary. We all had a good laugh, but there's a lot of truth in that statement.
    "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

    Comment

      #3
      Imf

      My understanding is that in the relevant years he was working outside the US for the International Monetary Fund and therefore quite legally and properly treated as a Contractor and paid on a Form 1099. I had understood that he used a tax professional but if he used TT or any other DIY software the matter is easier to understand. I'll bet he put his wages on line 21 instead of Sch C.

      My further understanding is that he got audited not long after he left IMF for the last two years he worked there and that he agreed to and paid the additional assessment. For whatever reason he did not go back to the two years prior to those when he had done the same thing, but this was caught when he was being vetted for the Treasury position and they made him at that time pay for those two years.

      I believe that he got from the IRS the same treatment that one of our clients who behaved in the same way would have gotten. I have not decided whether I have a problem with him as Treasury Secretary. At a minimum, he knows very little about taxes but then he is being put in the position in order to help get our economy going and not in order to improve the IRS.

      Comment

        #4
        Everything is forgiven - he has apologized.
        Geithner apologized to the Senate Committee today, and since we all know an apology is that's needed to wipe the slate clean, it's time to move on.
        Last edited by JohnH; 01-21-2009, 03:22 PM.
        "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

        Comment

          #5
          Actually I think the IMF people get a W-2 with no FICA paid; it ends up on line 7 but you have to calculate SE kinda like clergy does. It is doable in TT but not easy; you've got to know what you are doing. And IMHO it is a TT issue; they advertise you can do anything and everything with their program and I know really well this is not the case. And taxpayers with issues like this shouldn't think they can do it on their own.

          Comment

            #6
            Does anyone know if they abated the penalty and interest on the tax? That would be the real difference between his treatment and anyone else.
            In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
            Alexis de Tocqueville

            Comment

              #7
              Penalty and Interest

              If I remember right, when he was first audited he got abatement of Penalty but not interest and I don't think I have heard one way or the other about when he finally came clean about the earlier years.

              Comment

                #8
                Right, Joan

                Originally posted by joanmcq View Post
                Actually I think the IMF people get a W-2 with no FICA paid; it ends up on line 7 but you have to calculate SE kinda like clergy does. It is doable in TT but not easy; you've got to know what you are doing. And IMHO it is a TT issue; they advertise you can do anything and everything with their program and I know really well this is not the case. And taxpayers with issues like this shouldn't think they can do it on their own.
                as to the W2 from what I heard. Le'ts see now, W2, no FICA.. oh!
                that sounds like a preacher to me! (grin
                ChEAr$,
                Harlan Lunsford, EA n LA

                Comment

                  #9
                  A tax attorney came on NPR to clarify the problems with these IMF payments; according to her, IMF does not withhold, and IRS states they are self-employed for calculating the SE tax, but not for deducting expenses (i.e, as on Sche C) and has only recently attempted to clarify these rules to those involved. Very confusing for everyone. Also I heard that while he was audited for 2003-2004 and paid the tax, he had also followed the same procedures when he filed 2001-2002, although these were closed years and not audited by the IRS. When his name came up for Treasury, it was decided by the vetters he better pay up even if he was not required to.

                  Comment

                    #10
                    The IMF gave him extra money to pay the SE taxes at the time of his employment, he knew he was owed SE tax to the US Treasury. He choose to take that money and spend it on himself instead of pay the taxes. That's theft and fraud in my book. That's the problem with this stinking mess. Nannygate pales in comparison. He doesn't belong in the cabinet.
                    "A man that holds a cat by the tail learns something he can learn no other way." - Mark Twain

                    Comment

                      #11
                      I can see a real problem.Clients who do not have a strong moral center will be affected by this story. They will think this just proves that it is OK to cut corners and pay up when they make you.
                      JG

                      Comment

                        #12
                        You Nailed It!!

                        Originally posted by taxmandan View Post
                        The IMF gave him extra money to pay the SE taxes at the time of his employment, he knew he was owed SE tax to the US Treasury. He choose to take that money and spend it on himself instead of pay the taxes. That's theft and fraud in my book. That's the problem with this stinking mess. Nannygate pales in comparison. He doesn't belong in the cabinet.
                        Exactly...each quarter he was given a "reimbursement" of SE tax by IMF which he had to "sign for" acknowledging receipt of same. The purpose of these "quarterly reimbursements" just might have been to make "estimated tax payments" ?? He didn't know?? Give me a break!!
                        John

                        Comment

                          #13
                          Originally posted by JG EA View Post
                          I can see a real problem.Clients who do not have a strong moral center will be affected by this story. They will think this just proves that it is OK to cut corners and pay up when they make you.
                          Even those with a strong moral center are starting to be affected by this type of hubris. And that's putting our entire society in danger.
                          "A man that holds a cat by the tail learns something he can learn no other way." - Mark Twain

                          Comment

                            #14
                            You mean it isn't ok

                            to cut corners and then pay up if they make you?? I don't see it as a moral issue at all. If they catch you, you end up paying not only what you originally saved yourself but also interest for sure and penalty in all probability. I don't think it makes sense to reduce your self calculated tax past the point that you think you would probably survive a complete audit without significant change. I only take clients who agree with me on that. But I don't see people as being immoral when they become more aggressive than that even to the point of committing outright tax fraud. I can see where they might be considered too imprudent for a cabinet level appointment however.

                            Comment

                              #15
                              New Treasury Secretary

                              Caroline Kennedy just had to sacrifice a Senator appointment by Governor Paterson because she didn't pay a Nanny Tax. Poor girl.
                              Uncle Sam, CPA, EA. ARA, NTPI Fellow

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