A U.S. Tax Court has rejected the exact same defense that Treasury Secretary Timothy Geithner used to explain his failure to pay self-employment taxes — namely, that TurboTax, the computer software program, was to blame for his failure to pay all of his federal taxes when he worked as a contractual employee for the International Monetary Fund.
The taxpayer in Monday’s case, who like Geithner worked for the International Monetary Fund, “failed to carry his burden of establishing that there was reasonable cause for, and that he acted in good faith with respect to, any portion of the underpayment for each of his taxable years 2005 and 2006…” the court ruled Monday.
The taxpayer in question had requested what he called the “accuracy-related penalties…[of $2,435.40 for 2005 and $3,655.40 for 2006 to] be waived” due to his supposedly “good faith” effort to correct his returns.
IMF is a unique employer in that it provides a W-2, but does not withhold federal income or FICA (Social Security) taxes. A 2006 audit by the IRS showed that Geithner owed $17,230 in back taxes and interest. Another $25,970 tax liability was discovered after he was nominated to be President Obama’s Treasury secretary.
The disclosure caused a political stir, because it meant a tax-evader would be in charge of the IRS. But Geithner insisted the mistakes were caused by TurboTax.
Likewise, the taxpayer in this case blamed TurboTax, and the court did not buy it: “At the respective times petitioner filed his 2005 return and his 2006 return he knew that he was responsible for self-employment tax. Nonetheless, neither his 2005 return nor his 2006 return reported any self-employment tax….We do not find credible petitioner’s claim that any such ‘experts’ told him that self-employment tax was included in the computation of petitioner’s tax in his 2006 return when that return itself did not report any self-employment tax.”