A Tax Cheat By Any Other Name

The excuses being offered for Treasury Secretary nominee Terry Geithner's failure to pay to the federal government payroll taxes he owed on income he earned while working at the International Monetary Fund from 2001-04--about $42,000 in taxes and interest--should ring hollow with any objective observer. Missing in all of the mainstream media reports is the fact that Geithner had already been paid money by the IMF to pay the payroll taxes. He simply didn't bother to pay the federal government, even though he signed forms with the IMF promising to pay the taxes, until he got caught by the IRS.

Unlike you and I, the IMF does not withhold state and federal income taxes or payroll taxes (Social Security and Medicare) from its employees' paychecks. The IMF does, however, gross up their employees pay to cover those taxes, which the employee in turn promises to pay to the government. The National Review's Byron York explains:

"[T]he IMF took great care to explain to those employees, in detail and frequently, what their tax responsibilities were. First, each employee was given the IMF Employee Tax Manual. Then, employees were given quarterly wage statements for the specific purpose of calculating taxes. Then, they were given year-end wage statements. And then, each IMF employee was required to file what was known as an Annual Tax Allowance Request. Geithner received all those documents.

The tax allowance has turned out to be a key part of the Geithner situation. This is how it worked. IMF employees were expected to pay their taxes out of their own money. But the IMF then gave them an extra allowance, known as a “gross-up,” to cover those tax payments. This was done in the Annual Tax Allowance Request, in which the employee filled out some basic information — marital status, dependent children, etc. — and the IMF then estimated the amount of taxes the employee would owe and gave the employee a corresponding allowance.

At the end of the tax allowance form were the words, “I hereby certify that all the information contained herein is true to the best of my knowledge and belief and that I will pay the taxes for which I have received tax allowance payments from the Fund.” Geithner signed the form. He accepted the allowance payment. He didn’t pay the tax. For several years in a row . . .

York goes on to explain that Geithner paid his income tax obligations but not his payroll tax obligations. He also filled out a tax allowance form with the IMF which states, ‘I wish to apply for tax allowance of U.S. Federal and State income taxes and the difference between the “self-employed” and “employed” obligation of the U.S. Social Security tax which I will pay on my Fund income.” When York asked Capitol Hill sources familiar with Geithner's tax situation if Geithner had been made whole for taxes he did not pay, the answer he received was "Yes." Geithner paid the back taxes he owed for 2003 and 2004 after an IRS audit. He skipped out on paying the 2001 and 2002 back taxes until Obama nominated him as Treasury Secretary. In a closed-door meeting with the Senate Finance Committee, York reports that Geithner blamed his failure to pay the taxes as an oversight.

It is absolutely inconceivable in light of this evidence that Geithner can claim his failure to pay the taxes as an oversight. If it was an oversight, then why didn't he pay the 2001-02 taxes when the IRS cited him for the failure to pay the 2003-04 taxes? This is far worse than mistakes made by ordinary Americans every day in meeting their tax obligations. Geithner didn't even have to pay the taxes in question out of his own pocket. He took the reimbursement from the IMF and then stiffed the IRS. Let's call Geithner for what he is--a tax cheat. Congratulations, America. The next person to be in charge of the IRS is himself a tax cheat. Do you think the IRS will be as forgiving to you for your tax oversights when it comes knocking on your door? How about Bernie Madoff for SEC Chairman?

UPDATE: There was even more cheating according to Politico's Roger Simon:

According to Gordon and Parnes: “In addition, Geithner included payments to overnight camps in calculating his dependent child care credit in 2001, 2004 and 2005. His accountant informed him in 2006 that the camps were not allowable expenses. The committee notes that Geithner did not file amended returns to fix the mistake.”