Posted by Jim Lindgren:
geithner
http://volokh.com/archives/archive_2009_01_18-2009_01_24.shtml#1232612258
2005 TurboTax would not have prompted Geithner on Self-Employment
Taxes. Treasury nominee Timothy Geithner had several tax problems that
are mentioned in this matter of fact [1]Senate Report.
Among Tim Geithner's tax problems are:
1. Geithner�s failure to pay self-employment taxes in the years
2001-2004 on his IMF income.
2. Geithner�s taking a dependent care credit for the costs of
overnight camp in 2001, 2004, and 2005.
Geithner prepared his own return in 2000, 2001, 2002, and 2005.
Wednesday Geithner disclosed that he used TurboTax.
I wondered how plausible it was that TurboTax wouldn�t prompt Geithner
adequately on these issues (there was also a suggestion that he may
have been misled by improper advice from a tax preparer, despite the
repeated information released from the IMF on his need to pay
self-employment taxes).
To explore these issues, I installed both the 2004 and 2005 TurboTax
on my new Dell Latitude E4200 (2.25 lb. notebook).
SELF EMPLOYMENT TAXES.
If Geithner�s IMF income were entered from a 1099-MISC (which it
wasn�t), the self-employment tax would have been automatically added;
he would have had to override it manually to avoid the SE tax.
But that is not how the IMF reported Geithner�s income. They used a
W-2, with �NONE� or blanks in all boxes except wages. In both the 2004
and 2005 TurboTax program, if you enter income only from a W-2, it
does NOT add that income to schedule C and it does NOT compute a
self-employment tax.
So, while technically TurboTax did not make a �mistake,� TurboTax
would have neither computed the SE tax automatically, nor would it
have prompted Geithner appropriately that he needed to pay that SE
tax. In other words, any knowledge of Geithner�s SE liability would
not have come from the usual TurboTax guided interview, but rather
from the IMF.
OVERNIGHT SUMMER CAMP.
Geithner took a dependent care credit for the costs of overnight camp
in 2001, 2004, and 2005. If one takes the normal interview process in
TurboTax, it just prompts you for the amount. If you are �Not sure if
your expenses qualify,� you can click �Guide Me.� The steps involved
in that sub-interview do not ask about camp, but rather covers
information about the child and the parents.
Screenshot from 2005 TurboTax
If, however, you click the button �Learn more about this topic,� then
you see a small number of questions and answers, the last of which
clearly states that overnight camps do not qualify for the credit.
Accordingly, if Geithner were curious about whether these camp
expenses qualified, one of the two links he might have clicked would
have given him an answer.
Screenshot from 2005 TurboTax
Again, while TurboTax did not make a �mistake,� TurboTax would not
have prompted Geithner specifically about the overnight summer camp.
This time, however, the link �Learn more about this topic� would have
supplied the correct answer. But, if he didn�t click on this link,
TurboTax would not have informed Geithner that overnight camp didn�t
qualify for the child care credit.
CONCLUSION:
Contrary to the comments of some on the web, neither of the two major
errors in Geithner�s returns that I explored would have been covered
by interactive prompts in the 2004 or 2005 versions of TurboTax.
Other tax issues, which I am not commenting on, [2]include these:
1. Geithner�s failing to refile in 2006 and pay back
self-employment taxes from 2001 and 2002 after he was audited on
that issue for the 2003 and 2004 tax years. He waited until he was
nominated to head up Treasury to pay these taxes that the IRS could
no longer demand because of the statute of limitations.
2. Geithner�s failing to refile and pay back tax credits for
overnight camp in 2001, 2004, and 2005, when he was informed in
2007 (or 2006) by an accountant that his credit for overnight camp
was not allowed. Apparently, in 2007 the 2004 and 2005 returns were
not quieted by the statute of limitations, though the 2004 return
had been previously audited by the IRS.
3. Geithner�s failing to report and pay a 10% penalty on an early
withdrawal from a government pension.
References
Visible links
1. http://finance.senate.gov/press/Bpress/2009press/prb011309d.pdf
2. http://finance.senate.gov/press/Bpress/2009press/prb011309d.pdf
Hidden links:
3. file://localhost/files/jim-geit1a.png
4. file://localhost/files/jim-geit2.png
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