In the midst of the current economic crisis, I know that many in Congress were hoping for a smooth transition to a new administration. That may not happen. President Elect Barack Obama’s nomination to head the Treasury Department has hit a road block: revelations that Timothy Geithner had failed to timely pay $34,000 in taxes.

Republicans and Democrats have indicated that the information about back taxes (which were eventually paid) would not necessary block the nomination. Sen. Orrin Hatch (R-UT) has said he had “no problem” with Geithner while Sen. Charles Grassley (R-IA) called the information “serious, and whether or not it’s disqualifying is to be determined.” With all of the buzz, it looks like it will definitely not be smooth sailing for Geithner at his confirmation hearing.

The problem stems from Geithner’s 2001-2004 stint at the International Monetary Fund. Geithner failed to pay SE taxes (self-employment taxes, which are basically the FICA equivalent for an independent contractor or otherwise self-employed person). At IRS audit in 2006, Geithner repaid the obligation for 2003 and 2004 but did not pay the tax for 2001 and 2002 until 2008. Remarkably, that amount due wasn’t discovered by the IRS at audit but by Obama’s transition team.

Many in Congress believe that the filing omissions were not intentional and that the confirmation hearing will proceed without further problems. Intentional or not, it’s a sure bet that no matter what Congress is saying now, the hearing will not be an easy one for Geithner.

Geithner formerly worked with the International Affairs division of the U.S. Treasury Department. He went on to serve as an attache at the US Embassy in Tokyo before working under Treasury Secretaries Robert Rubin and Lawrence Summers. Geithner then served as the director of the Policy Development and Review Department at the International Monetary Fund for the tax years in question. He was later named president of the Federal Reserve Bank of New York.

An impressive resume, for sure. But what about the tax issues?

It’s not surprising to hear about someone failing to file SE taxes – or other taxes related to self-employment. I see it all of the time – just look at my “ask the taxgirl” questions. But most of the time, the folks who make those mistakes are web designers, authors, engineers and writers… They are not people whose entire careers have been focused on money management.

Timothy Geithner’s career has always been about money and he’s now on tap to lead the Treasury. He will set the tone for how our country reacts to economic news, as well as tax policy. He will follow in the footsteps as such esteemed Secretaries of the Treasury as Alexander Hamilton, William Gibbs McAdoo and James Baker (I’ll conveniently leave out Henry “I’ve pulled one over on the American people” Paulson).

Is this really the face that we want as representative of our economic policy? Especially in a time of crisis? What do you think?

Print Friendly, PDF & Email

Kelly Erb is a tax attorney, tax writer and podcaster.


  1. If “nanny tax” issues were enough to derail Kimba Wood, Zoe Baird, and Bernard Kerik (OK, maybe it wasn’t the nanny tax that pushed Kerik’s nomination over the edge), then Geithner may be in for a rough ride.

  2. I want this guy in. Next time I make a mistake on my taxes, I will point to him and say, “look, if he can’t figure out the rules, then how can I?”

  3. Stan Jedrusiak Reply

    I don’t buy the innocent plea. It’s not that easy to omit SE tax. We should find someone with more scruples.

  4. One thing is for sure the New York Times (Pravda West) won’t remember any of the former tax dodgers mentioned above. I agree with Mr. Adamsky; maybe its time we had a grandiose rendition of the Boston Tea Party. With this clown in charge of the IRS…………….we could withhold our Federal Income Taxes for awhile…………or at least until there’s 100% transparency for the $$ we gave those crooks in New York who should be wearing orange jump suits. Maddof………….where’s James Earl Ray when you need him.

  5. Lets assume that Geithner made a mistake and didn’t know he had to pay the missed tax. If so, his mistake was caught on audit (at least for 2 of the 4 years that the problem existed). Catching mistakes is part of what the audit process is about. Following the audit, he paid the 2003 and 2004 tax.

    The Statute of Limitations on assessing additional tax for 2001 and 2002 had likely expired at the time the audit occured. As such, Geithner could no longer be compelled to pay the unpaid 2001 and 2002 tax. So he didn’t, at least not until recently. I doubt that many would voluntarily pay an unpaid tax that they could not be legally required to pay. I’d be suspicious of the motivations of anyone who says they would.

    If this was a mistake, he didn’t do anything wrong. He simply followed the procedures under the tax law. Perhaps a respect for and understanding of the procedures is the kind of thing we need in a Treasury Secretary.

    That said, it is the perception that he didn’t pay his fair share that matters. For that reason, he probably should withdraw from consideration.

  6. Wayne Hagelberg Reply

    The overriding issue is that a person in the position of Treasury Secretary sets the standard for the organization he oversees, and since his organization enforces the tax laws, the taxpayers also look to him as the standard-setter. There is a lack of confidence in the monetary, financial and regulatory systems. Having a leader who does not understand simple self-employment tax rules does not increase public confidence in these systems. Therefore he should not be allowed to lead the Treasury.

  7. Christina Reinert Reply

    I agree with the above post. Also, having Geithner be the top dog of the IRS/Treasury Dept. is like having the country of Libia on the Human Rights committee at the UN. (and they were!) This is a mixed up world.

Write A Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.