Geithner and the Nanny Tax

by Chris Sturr | January 27, 2009

Timothy Geithner was confirmed as Treasury Secretary yesterday, despite his tax problems. The tax problem that got the most press was his failure to pay “self-employment taxes” when he worked at the International Monetary Fund. (“Self-employment taxes” is just payroll taxes for 1099 income; at least one member of the D&S staff–ahem–has made the same mistake Geithner made, but I don’t remember the IRS being as generous about waiving fees.) I kept hearing that he owed $34,000; the number struck me because that is very close to the median personal income in the United States–and our new Treasury Secretary owed that in taxes. I guess it’s nice to have someone who has seen income inequality up close be in our top economic position. (Do you follow that logic? Me neither.)

The other tax problem he had was in not paying his “nanny tax”–Geithner apparently failed to pay taxes properly for his housekeeper. An interesting piece in the business section of last Friday’s New York Times addressed the nanny tax. This was in the Times‘s “Your Money” column, though as usual for (much of) the Times, the intended audience (the “you” of “Your”) skewed to the higher tax brackets. (For what percentage of the population is properly paying your taxes for servants a big tax quandry?) The Times gets credit, I guess, for advising relatively well-off people to Do The Right Thing and pay into Social Security, Medicare, disability, and unemployment for their servants. Most of the article is about how labyrinthine the process of complying with the law is, but the article does include this as a reason for bothering:

[C]onsider the human side of this. Household employees who spend their working years laboring for employers who don’t pay Social Security or Medicare taxes won’t be eligible for those benefits come retirement time. Is that any way to repay someone for years of service, especially if you’re not paying them enough to put away much money on their own?

I wonder whether Geithner used his $34,000 to pay his housekeeper (though I’d bet that would be on the generous end for domestics, judging from recent union activity among domestic workers in the New York area).

Here’s the rest of the article, in case you’re an Obama cabinet appointee and want to put your house in order.

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