MELISSA BLOCK, host:
President-elect Obama's choice for Treasury secretary has made some mistakes paying his taxes. Tim Geithner, the Treasury nominee, was on Capitol Hill today in a private meeting with the Senate Finance Committee, explaining why he had failed to pay $34,000 in taxes from 2001 to 2004. NPR's John Ydstie is here and John, Tim Geithner has been president of the Federal Reserve Bank in New York. He's the guy who's supposed to help get us out of this financial crisis. What's the explanation for this lapse in taxes?
JOHN YDSTIE: Well, it's being described as an honest mistake by the chairman of the Finance Committee, Max Baucus, a Democrat from Montana. But it's certainly got to be more embarrassing for Geithner than it might be for the rest of us making some tax mistake. During this period, he did do his own taxes, at least part of the time, but he also faced some complexities because he worked for the International Monetary Fund during this period. And employees of the IMF face different tax rules than the rest of us.
BLOCK: And what's the difference in those tax rules if you work for the IMF?
YDSTIE: Well, as I understand it from documents the Senate Finance Committee provided, the IMF doesn't withhold money for U.S. taxes, but it adds the approximate amount to the employee's pay. And then the employee has to forward the tax payments to the IRS. It appears that Geithner forwarded some tax payments, but not others. For instance, he owed Social Security tax to the U.S. government. He did forward the employee portion to the IRS, but he did not send in the portion of the Social Security tax normally paid by the employer - in this case, the IMF - which he was supposed to do.
BLOCK: And how did this all come up? Who discovered this?
YDSTIE: Apparently, the $34,000 error was discovered by the Obama transition team that was investigating Geithner's background. And according to documents from the Senate Finance Committee, the IRS had previously examined Geithner's 2003 and 2004 tax returns, and he had agreed to pay additional amounts on them, but the IRS waived any penalties there.
BLOCK: And we should say he has now paid these taxes plus interest and penalties.
YDSTIE: He's paid up. Exactly.
BLOCK: How much of a hurdle is this going to be for Tim Geithner, John?
YDSTIE: Well, given what we know now, I don't think it's going to be a big hurdle as long as it's concluded it was an honest mistake. That's what Senator Baucus is saying, that's what the Obama camp is saying. Unless it's demonstrated otherwise, this shouldn't block his confirmation. Even Republican Senator Orrin Hatch of Utah said as much today.
BLOCK: And there was another issue that came up today. Apparently, a housekeeper who worked for Tim Geithner a few years back had working papers that had expired.
YDSTIE: Right. And Mr. Geithner asked her for her papers when she was hired. They expired three months before her employment ended. She subsequently got a green card and apparently, Geithner paid all the required taxes on her employment.
BLOCK: And the response from the Obama campaign to all this?
YDSTIE: Well, Robert Gibbs, Mr. Obama's spokesman, said that upon learning of his mistakes, Geithner quickly addressed them, so his record of serving his country with honor and distinction shouldn't be tarnished by this.
BLOCK: OK. NPR's John Ydstie, thanks so much.
YDSTIE: You're welcome. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
