Taxing Problems

Prominent people have, over the past few months, taught us things about taxes for which we should be grateful. Our teachers have gone from the very lowly (see Joe the Plumber) to the very sophisticated (see Tom Daschle).

Joe taught us the very simple lesson that the government imposes taxes on people who have income and the tax must be paid. Income is elaborately defined in the Internal Revenue Code but for Joe’s purposes it was most likely the modest amount he earned by working. Joe failed to pay those taxes and the county placed a lien on his property to insure it would eventually get its due.

Our next instructor was Timothy Geithner, Secretary of the Treasury and currently in the news because of his actions with respect to AIG bonuses. What we learned from him has nothing to do with AIG and is not terribly helpful to the average taxpayer. We learned that the International Monetary Fund (for which he worked) does not pay its share of the payroll taxes imposed on employers by the IRS. Instead, it pays the employee the one-half share owed by the employer and tells the employee to file the necessary return and pay the entire tax himself. Mr. Geithner failed to file the return and pay the taxes. When the mistake was discovered, he paid the taxes for the years in which the IRS could compel repayment but did not pay them for the two years for which collection was barred by the statute of limitations until he was nominated as Secretary of Treasury. The only lesson that is useful to readers (since few if any of them will be hired by the IMF) is that if collection of taxes is barred by the statute of limitations and the taxpayer declines to voluntarily pay those taxes until he or she is being considered for a high government position, the taxpayer is in good company and need have no feelings of guilt.

Our next instructor was Tom Daschle. As instructors go, he was considerably more sophisticated than Joe the Plumber and was involved in a less exotic area of the tax law than Mr. Geithner. Mr. Daschle taught us two things. One is that in order to have taxable income, it is not necessary that you collect a paycheck. If you raise squirrels and pay a plumber by giving him a bunch of squirrels, the plumber has taxable income equal to the value of the squirrels. I use squirrels in my example because my readers are more apt to be paid in squirrels than to receive the benefit bestowed on Tom Daschle. His employer gave him a car and a driver to drive him around town. Not having the benefit of my squirrel example, Mr. Daschle did not realize that the car and driver were taxable income. That was, however, not the most useful thing Mr. Daschle taught us. He taught us that when you give $5 to someone standing on the corner with a sign asking for money that ends “God Bless,” the Lord may indeed look favorably on the donor but the Internal Revenue Service does not. That is because the Lord and the IRS do not bless the same transactions. The $5 cannot be deducted on your income tax return as a charitable contribution.

According to a report in the Wall Street Journal the Obama team that was vetting Mr. Daschle discovered that Mr. and Mrs. Daschle gave money to a wounded Iraqi war veteran and claimed those gifts as charitable contributions on their federal income tax returns. To claim a charitable deduction the money must be given to a charitable organization that has been recognized as such by the IRS by bestowing on it a 501 (c)(3) designation and not by dropping random bills in beggars’ hats.

Our final instructor is Nancy Killefer. She was nominated to be the White House chief performance officer. Ms. Killefer had household help for whom she failed to pay unemployment taxes. A $946.69 lien was placed against her house for the taxes and the lien statement said she “neglects and refuses to pay the same”. It is not clear why she waited to pay the taxes until there was a lien placed on her house. The lesson she has taught us is that if you have household help you should check with your accountant to learn whether or not you are subject to withholding taxes and paying unemployment taxes.

The foregoing are just a few of the people nominated for positions in the Obama administration who have tax problems and they are probably a representative sampling of people, Democrats and Republicans alike, who are so important they don’t have time to familiarize themselves with the tax laws. If any of them happens to read this I hope they find it helpful. The rest of my readers, being less important, probably knew everything discussed in this column except the useless bit about the IMF and found the entire thing a waste of time. To them I extend my apologies.

CHRISTOPHER BRAUCHLI is a lawyer living in Boulder, Colorado. He can be reached at:


Christopher Brauchli can be e-mailed at For political commentary see his web page at