Geithner

There are millions of small business owners and millions of others who work as individual contractors. This means, among other things that they must pay self-employment tax. For most people who work for someone else this is not a concern because your employer will withhold 7.65% of your salary as payroll tax. Payroll tax is 6.2% for social security and 1.45% for Medicare. The employer matches that 7.65% so the government gets 15.3% of your salary. Now take the case of the former Secretary of Treasury Tim Geithner. He was working for the IMF and was considered an independent contractor. They told him when he started that he would be responsible for paying the 15.3% payroll tax but they unlike most employers gave him extra money to pay for this tax. When he filed his taxes in years 2003 and 2004 he failed to pay this tax and when he was caught he agreed to pay the back taxes plus interest. He said he was not aware of the mistake. A year later he was notified that he also failed to pay this tax for tax years 2001 and 2002. To get a perspective on the amount of money we are talking about, assume that his salary was $100,000. They gave him an extra $15,300 to pay this, which he kept and then did not pay the $15,300 he owed, meaning he ended up with $115,300 instead of $84,500. A nice tidy sum I would say. Let’s be generous and say he forgot the first time but did he not think about the earlier years!