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Obama: Geithner's tax errors an 'innocent mistake'

WASHINGTON - President-elect Barack Obama and Senate Finance Committee chairman Max Baucus said Timothy Geithner should be confirmed as Treasury secretary as Republicans moved to delay his hearing and weigh questions about his taxes.

Obama said yesterday his "expectation" is that Geithner will be approved by the Senate. Obama said while the errors in Geithner's taxes were an "embarrassment" for the nominee, "it was an innocent mistake."

Republican members of Baucus' committee, now scheduled to hold a confirmation hearing Jan. 21, also expressed support for Geithner, who told panel members yesterday he paid almost $50,000 in back taxes and interest. As Treasury secretary, Geithner would oversee the Internal Revenue Service, the largest agency in his department.

"This is an honest mistake and it's clear there was no intention not to pay it and he did pay immediately, as soon as his mistake was discovered," Baucus, a Montana Democrat, said.

"Add to that, the country needs him."

Iowa Sen. Charles Grassley, the top Republican on the Finance Committee, called the tax issues "disconcerting," saying they were "a little bit detracting" from the committee's examination of Geithner's leadership and positions on policies such as the $700-billion financial-system rescue.

Senators must weigh their concern about Geithner's tax situation with his qualifications to steer the economy out of its troubles, he added.

Kansas Republican Sen. Pat Roberts said he spoke by telephone with Geithner and that he is a "good man" who "really knows his stuff." Although Roberts said the timing of the disclosure is "troubling," he said his "guesstimate is he'll be approved with my vote." Utah Republican Orrin Hatch also has said he will vote for Geithner.

At issue is Geithner's failure to pay self-employment taxes while working at the International Monetary Fund. Questions also were raised about a lapse of his housekeeper's legal status. Geithner said he was unaware the woman's immigration papers had expired three months before she stopped working for him, according to an official on Obama's transition staff. The Finance Committee said taxes for the housekeeper were "appropriately paid."

The IRS in 2006 and 2007 offered leniency to U.S.-based employees of international organizations and foreign embassies, saying there were rampant problems with tax-law compliance.

"The IRS estimates that as many as half of these employees subject to U.S. tax fail to report their wages, claim deductions they are not entitled to, incorrectly establish" retirement plans, "fail to pay self-employment tax or fail to file tax returns," the agency said in a March 22, 2007, news release.

Geithner, who prepared his own tax returns in 2000, 2001, 2002 and 2005, and used paid preparers in other years, acknowledged receiving a written guide on how to pay the self-employment taxes he owed, according to a summary of the case by the Senate Finance Committee. He also late-filed Social Security taxes for household employees in the 1990s, the committee said.

The Treasury secretary-designate didn't pay some of the back taxes until it was clear he would be nominated for the post, the panel said.

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