Treasury Nominee Accounts for Own Tax Errors

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Obama: Geithner Situation an 'Embarrassment'

President-elect Barack Obama called disclosures about Treasury choice Timothy Geithner's tax problems an embarrassment Wednesday but said Geithner's 'innocent mistake' shouldn't keep him from confirmation.

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The complication of Geithner's nomination, reported on the Wall Street Journal's Web site yesterday, was the latest in a series of missteps by Obama's team, a list that includes New Mexico Gov. Bill Richardson's decision to withdraw from consideration as Commerce secretary because of an ongoing grand jury investigation and the rocky reception in the Senate when Leon Panetta was announced as Obama's choice to head the CIA.

Documents released by the Finance committee documented the errors made by Geithner. One showed his signature on a tax worksheet that states that he has an "obligation of the U.S. Social Security tax, which I will pay on my fund income."

Obama aides described Geithner's failure to pay Social Security and Medicare taxes as innocent mistakes he made between 2001 and 2004, when he was employed at the IMF.

Because the organization employs many foreigners, it does not automatically withdraw those taxes from the paychecks of its employees, requiring them to pay the taxes themselves. Geithner did not do so for the four years he worked there.

A source at the IMF, who spoke on the condition of anonymity because he or she was not authorized to speak for the organization, said last night that Obama aides and the Senate committee staff provided an accurate description of a complicated employment situation.

"The system is very complex, and it is not unheard of for mistakes among U.S. nationals to happen," the source said.

Obama aides said Geithner became aware of the mistakes in 2006, when an IRS audit revealed that he had not paid what he owed for the returns he filed for 2003 and 2004. At the time, Geithner paid back taxes and interest totaling $16,732.

After he was chosen to be the next Treasury secretary, Obama's vetting team discovered on Nov. 21 that he made the same mistake in 2001 and 2002 -- mistakes overlooked in the earlier IRS audit.

Upon learning of the additional mistakes, aides said that Geithner paid an additional $25,970, aides said, even though the statute of limitations on the tax return errors had expired and he was not legally required to pay.

Obama press secretary Robert Gibbs said Geithner's "service should not be tarnished by honest mistakes, which, upon learning of them, he quickly addressed. 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. We hope that the Senate will confirm him with strong bipartisan support so that he can begin the important work of the country."

Obama aides said Geithner had been forthcoming about the tax problems and his audit when he was selected for the Treasury post. "Geithner is not trying to hide anything," spokeswoman Stephanie Cutter said.

The situation with his housekeeper involved a legal immigrant for whom Geithner had properly paid all taxes; he also had checked work documents when he hired her, Obama aides said. Three months before her employment with Geithner ended, the documentation allowing her to be employed in the country expired.

Aides said the housekeeper, married to a U.S. citizen, was never in the country illegally while she worked for Geithner, and she received new, proper work documents a few months after leaving his employ.

Senate Majority Leader Harry M. Reid (D-Nev.) told reporters on Tuesday that he was not concerned about Geithner's nomination.

"There's a few little hiccups, but that's basically what they are," he said. "I am not concerned at all."