Common Tax Mistake? Really??

Timothy Geithner, whose nomination as the next treasury secretary has hit a bump with revelations that he did not pay self-employment taxes in 2003-2004 while employed by the International Monetary Fund, has made a "common tax mistake," according to the Obama transition team.

Keep in mind that the author of this post is a trained tax preparer.

There is also a question about his housekeeper and the required paperwork she needed to be in the country. That I can understand, and I would not expect that to stand in the way of his nomination. However, it appears he did not pay (on time) the required withholding taxes for the housekeeper during the 2001-2002 period.

All of these taxes have since been paid, with penalties and interest.

The phrase "common tax mistake" is being used to describe this "oversight" during Geithner's IMF days. And, indeed, many individuals do not know that if they had income as a self-employed individual, as well as certain other categories of income for which no Social Security taxes were withheld, that they must identify this on their 1040 and settle up by April 15.

Any good first-year tax preparer should know this.

The IMF, being an international organization, probably does not withhold United States taxes on income. They may not be required to; I do not know. The simple solution, which Geithner certainly had to know, was to declare this on his properly-filled-out 1040 and pay up by the subsequent April 15. Therefore, the only reasonable causes (listed in order of likelihood) for this "common tax mistake" must be the following:

1. He lied. He intended to evade paying his taxes.
2. He employs an inept or dishonest CPA/tax preparer. (And if so, he'd be justified in demanding a refund of his tax preparation fees. Few people in his tax bracket prepare their own taxes.)
3. He really is ignorant about the basics of personal income taxes. According to one news report I heard today, he did his own taxes in those years. And if so, his ignorance of basic tax law is worrisome.
   

The fact that the mistake is common only makes it more likely that a competent tax prepaper will avoid making it! Is this who we want in charge of the IRS and the Treasury Department?