California Governor Arnold Schwarzenegger (R) is not having the best holiday weekend. On Black Friday (which may take on a completely different meaning for the “Governator”), TMZ.com posted information about a federal lien filed by the IRS in May against Schwarzenegger for nearly $80,000. Schwarzenegger’s office promptly (imagine that) claimed that the lien was a result of a “a minor paperwork tracking discrepancy.”
The Schwarzeneggers have indicated that, at no time, were taxes unpaid. Schwarzenegger’s spokesman, Aaron McLear, said in a statement. “The matter will be resolved and the lien expunged without any penalty assessed upon the governor.” There’s been no further comment.
There could be some truth to what he’s saying. The lien, a copy of which was posted on TMZ.com (downloads as a pdf), indicates that the lien is related to section 6721. Section 6721 deals with information returns, not taxes owed. Specifically:
(2) Failures subject to penalty
For purposes of paragraph (1), the failures described in this paragraph are—
(A) any failure to file an information return with the Secretary on or before the required filing date, and
(B) any failure to include all of the information required to be shown on the return or the inclusion of incorrect information.
The section goes on to impose penalties on information returns which are not timely filed or have mistakes. In that regard, Schwarzenegger would be subject to penalties (though at $50-100/pop, those are a LOT of penalties!) even though no “tax” was technically due.
Information returns would include such ordinary forms W-2, W-3, 1099, 1096, etc. If that’s the case, it could likely be related to household employee payroll taxes (household employees would include workers such as housekeepers and nannies). However, Schwarzenegger’s office is strongly hinting at the fact that it’s more removed than that – but then, they are politicians.
The IRS isn’t talking, of course. They don’t comment on individual tax matters.
I guess we’ll have to wait and see what the Schwarzeneggers reveal next week. Considering Schwarzenegger’s tough tax stance in California, you can bet that they’re not going to let this one go…