Timothy Geithner Received IMF Reimbursement for Taxes He Did Not Pay

More trouble for Timorthy Geithner, Barack Obama’s nominee for Secretary of the Treasury (and head of the Internal Revenue Service).

Byron York over at National Review has the poop.

Although it has been dismissed by some observers as a “hiccup” in an otherwise smooth confirmation process, treasury secretary-designate Timothy Geithner’s failure to pay self-employment taxes during the years he worked at the International Monetary Fund is causing some Republicans on Capitol Hill to ask serious questions about his actions. First among those questions is why he accepted payment from the IMF as restitution for taxes that he had not, in fact, paid.

Documents released by the Senate Finance Committee strongly suggest that Geithner knew, or should have known, what he was doing when he did not pay self-employment taxes in 2001, 2002, 2003, and 2004. After his failure to pay was discovered, first by the IRS and later during the vetting process, Geithner paid the federal government a total of $42,702 in taxes and interest.

The IMF did not withhold state and federal income taxes or self-employment taxes — Social Security and Medicare — from its employees’ paychecks. But the 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.

Flap listened to GOP Senators Lindsey Graham (R-SC) and John Ensign (R-NV) poo poo the story this afternoon. But, wait.

Did these Republican Senators know all of the story? Doubtful – at least Flap hopes.

Republican Senator Charles Grassley, the ranking mmeber of the Senate Finance Committee must now demand answers from Geithner as to why he did not pay his taxes after receiving the money to do so? This flap is more than a minor hiccup in the confirmation process.

Timothy Geithner’s credibility and competence can truly be questioned.

The Senate should do just that when Geithner’s confirmation hearings resume next week – after Obama’s inauguration.

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