I’ve been thinking about Timothy Geithner, whom I poked fun at with a cartoon last Saturday. He had two mis-steps which he overcame to still be confirmed as Treasury Secretary. First, his housekeeper’s legal immigration staus lapsed while still working for Geithner. I can understand this oversight, it seems the kind of thing you’d check when employing someone but not track dates on your calendar for when the status lapses. He gets a pass on that one. His income tax issue is a bit of a different story. While working for the IMF (International Monetary Fund) from 2001-3 no taxes were withheld, the employee is supposed to forward his own tax payments during the year and file a return as we all do at year end. It seems he managed to forward the employer social security portion, but not his own. On one hard I’m sympathetic for anyone who finds the code so confusing, yet there’s a part of me that wonders if this guy can’t get it right, what chance do the rest of us have?
Daschle wasn’t so fortunate. It seems he accepted the use of a chauffeur service without declaring that on his taxes and this burned him. I don’t know under what circumstance a gift turns into a taxable event (I thought the giver was responsible to file a gift tax return) but again, someone at his level should be better aware of the tax code that the average Joe.
This speaks as much to the ethics of the men involved as it does to the complexity of the tax code itself. When my daughter was born and we had a nanny the first few years, I attempted to comply with the letter of the law regarding withholding taxes and paying my share of FICA (social security). What I found remarkable was the lack of consistency between the federal process and state. Federal allowed for the withheld funds to be included as a payment along with my own taxes. State required quarterly submission to the state treasury. Neither state nor federal made any distinction between a household employee/nanny/housekeeper or one of many employees employed by a business. Maybe this has changed, this was some years ago.
Joe