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Geithner Faces Questions Over Taxes, Housekeeper's Immigration Status

*NOTE: This post has been rewritten as new information has come in.

(AP Photo/Ian Barrett)
This afternoon, President-elect Barack Obama's pick to be Treasury secretary, Timothy Geithner, met with members of the Senate Finance Committee to address questions about his payment of personal taxes and the immigration status of a housekeeper.

As reports about the meeting surfaced, the transition team released a statement standing behind Geithner but effectively confirming that questions were being raised.

Geithner "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," incoming White House press secretary Robert Gibbs said. "We hope that the Senate will confirm him with strong bipartisan support so that he can begin the important work of the country."

"The President-elect chose Tim Geithner to be his Treasury Secretary because he's the right person to help lead our economic recovery during these challenging times," added Gibbs. "He's dedicated his career to our country and served with honor, intelligence and distinction. That service should not be tarnished by honest mistakes, which, upon learning of them, he quickly addressed."

Back in 1993, Zoe Baird and Kimba Wood, both nominated to be attorney general by Bill Clinton, withdrew from consideration after revelations that they had hired undocumented immigrants.

After this afternoon's meeting, reports CBS News' John Nolen, Democrats suggested that Geithner had made an honest mistake, and while the issues were serious, they didn't rise to the level of disqualification. Republicans on the committee did not offer comment.

"I am disappointed in the errors found in Tim Geithner's tax returns and other information, but I am satisfied that Mr. Geithner has taken the steps necessary to fix these problems," Senate Finance Committee Chairman Max Baucus said in a statement released after the meeting. "That's why I intend to move forward as soon as possible with a hearing on his nomination. The President-Elect needs a Treasury Secretary on day one. We have to roll up our sleeves and get this economy moving again for the American people, and Tim Geithner has the right combination of experience and skill for these difficult economic times. For these reasons, I continue to support his nomination to be the next Secretary of the Treasury."

Senate Majority Leader Harry Reid, meanwhile, suggested that the issues amounted to just "a few little hiccups" and said he is "not concerned at all," reports CBS News' Jill Jackson.

According to a source in the transition office, Geithner's tax-related mistakes are tied to his work for the International Monetary Fund. The Treasury secretary designate paid income taxes on his IMF income but apparently not his self-employment taxes. He corrected the mistake when it was discovered, according to the source, who suggested that such mistakes are common because, in an unusual arrangement, IMF employees' are treated as if they are self-employed for tax purposes.

The mistake was apparently discovered in November, during the vetting process for Geithner; he then made an additional tax payment of just under $26,000 for 2001 and 2002.

In 2006, the IRS audited Geithner because it believed he owed self-employment tax and interest unpaid on 2003 and 2004 returns; he paid an additional $17,230 and the IRS waved penalties.

The housekeeper, who worked for the Geithners from 2004 to 2005, had appropriate documentation when hired, but that documentation expired three months before she stopped working for them, the source said.

In response to the questions, the Senate Finance committee late this afternoon released Geithner's tax documents, along with a joint statement from Baucus and ranking Republican Charles E. Grassley.

"The Finance Committee is charged with the thorough vetting of all nominees whose confirmations fall under our jurisdiction," they said. "When errors or issues of concern are discovered, transparency is vital to allow members of the Committee and the entire Senate to fully review and assess the relevant information before hearings and votes occur. These documents are released to ensure such transparency. The Committee, and we as individual Senators, will continue to review Mr. Geithner's tax returns and other information in advance of a nomination hearing."

You can read the documents here.

Despite the claims of the source in the transition office, the IRS's website seems relatively clear on what IMF employees are supposed to pay. It may not have been as clear when Geithner first made the mistake. A section:

"U.S. citizens working in the U.S. must report self-employment income under the Self-Employment Contributions Act (SECA). SECA makes the contributions to the U.S. Social Security and Medicare systems for self-employed individuals. Self-employment tax is computed on Schedule SE, Self-Employment Tax, and reported on line 58 of the Form 1040. ... U.S. employees pay self-employment tax because the foreign government or organization is not liable for the employer's portion of the contribution to the U.S. system. However, these employees are not "self-employed" for any other federal tax purposes. They may not claim deductions for expenses on Schedule C. They are not qualified to establish a Simplified Employee Pension (SEP) Plan and there is no allowable deduction on line 28 of Form 1040 for contributions to any such plan. Rules of contributing to SEP/IRA plans are explained in IRS Publication 560 and Revenue Ruling 73-384."
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