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Treasury pick Geithner owed IRS $35,000

- The Washington Times - Wednesday, January 14, 2009

President-elect Barack Obama's Treasury Secretary nominee, who would oversee the Internal Revenue Service, failed to pay nearly $35,000 in federal taxes from 2001 to 2004 and has a history of mistakes and late-filing, senators preparing to vote on the pick said Tuesday.

In addition to the tax problems, the senators said the nominee, Timothy Geithner, also failed to fill out immigration forms for three housekeepers who worked for him since 2004, and he employed one of the housekeepers for more than three months after she was no longer legally allowed to work in the U.S.

Democrats said the delinquent taxes, some of which Mr. Geithner paid only after he learned that Mr. Obama was considering him for the post, were an "honest mistake." Republican senators said they will have to see what details emerge before deciding whether to support Mr. Geithner's confirmation.

It's the latest Cabinet-level foul-up for Mr. Obama. He has already had to withdraw his commerce secretary nominee, Bill Richardson, who is facing a federal corruption investigation, and his attorney general nominee, Eric H. Holder Jr., faces harsh Republican-led questioning this week over his role in President Clinton's end-of-term pardons.

"He made a common mistake on his taxes, and was unaware that his part-time housekeeper's work authorization expired for the last three months of her employment," said incoming White House press secretary Robert Gibbs. "We hope that the Senate will confirm him with strong bipartisan support so that he can begin the important work of the country."

The Obama transition team reported the tax and housekeeper issues to the Senate Finance Committee, which is reviewing Mr. Geithner's nomination.

Committee Chairman Max Baucus, Montana Democrat, and Senate Majority Leader Harry Reid, Nevada Democrat, both said they still support his nomination. Late Tuesday, Mr. Baucus said he wants to schedule a hearing on Mr. Geithner for Friday and wants someone to be in the post by the time Mr. Obama is inaugurated.

Sen. Charles E. Grassley of Iowa, the committee's top Republican, will reserve judgment until later in the process, a spokeswoman said. Mr. Grassley did release a joint statement with Mr. Baucus explaining they released the information so the full Senate could review the errors.

Other Republicans were trying to decide how much of an issue to make of the revelations.

"It's serious," said a senior Republican aide who requested anonymity because the senator for whom he works had not concluded how far to push the issues. "This is the guy who would run the IRS."

Mr. Geithner is currently president of the New York Federal Reserve Bank.

From 2001 through 2004, Mr. Geithner failed to pay Social Security tax from his time at the International Monetary Fund despite requesting an allowance from the IMF to pay them. Employees at the IMF are governed by special tax rules but are still required to pay payroll taxes. The IMF computes the taxes owed and boosts employees' salaries to cover the expense.

Mr. Geithner requested the allowance but never paid the tax, the senators said in a 30-page document detailing Mr. Geithner's tax calculations and the rules governing his situation.

Mr. Obama's team and others argued that the tax mistakes were common for someone who worked for the IMF. But the Finance Committee report included pages showing Mr. Geithner should have been aware he was in arrears.

The IRS audited Mr. Geithner in 2006 for tax years 2003 and 2004, resulting in back-taxes and interest. But it wasn't until after Mr. Obama began vetting him for the Treasury post that Mr. Geithner paid his back taxes and interest for 2001 and 2002.

All told, he paid $34,023 in back taxes and $8,679 in interest. The IRS waived penalties.

The Finance Committee said Mr. Geithner had other past instances of late-filing and mistakes for federal Social Security taxes, Medicare taxes for an employee and Maryland taxes.

Problems with tax returns have sunk nominees before.

In 2004, President Bush withdrew his nomination of Glen Bower to be a judge on the United States Tax Court after Mr. Baucus raised questions over tax deductions Mr. Bower took, and over what Mr. Baucus said were "woefully short" efforts to clean up his tax returns.

While senators sought to keep the focus on the IRS problems, the housekeeper issue could be just as volatile, and so-called "nanny problems" have derailed several nominees before.

President Clinton's first pick to be attorney general, Zoe Baird withdrew her nomination after acknowledging she hired two illegal immigrants as servants. And both Bernard Kerik, whom Mr. Bush tapped in 2004 to be homeland security secretary, and Linda Chavez, whom he nominated in 2001 to be labor secretary, were withdrawn because of illegal immigrant help they had hired.

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