Tom Daschle, former Senate majority leader and nominee for Secretary of Health and Human Services, issued an apology today to the Senate Finance Committee for his failure to pay $128,000 in back taxes. Daschle’s nomination for HHS Secretary is pending before the Senate Finance Committee. Daschle said he was embarrassed by his tax errors. Daschle recently amended his tax returns and paid the overdue taxes and penalties.
Tom Daschle is the second Presidential cabinet nominee to become embroiled in controversy over underpaid taxes. Treasury Secretary Timothy Geithner, whose nomination squeaked through on a 60-34 margin, was called to task two weeks ago for failing to report $34,000 in back taxes.
If Tom Daschle, who sat on the Senate Finance Committee, and Timothy Geithner, who is considered a financial wizard with qualifications to be Treasury Secretary, cannot accurately calculate their taxes, do the rest of Americans stand a chance?
While it’s easy to criticize public officials for incorrect tax filings (both Tom Daschle and Timothy Geithner filed tax returns; their error was filing incorrect tax returns), perhaps the Internal Revenue Service (IRS) is part of the problem here.
The IRS, responsible for promulgating regulations to implement and enforce the nation’s tax code, writes mammoth booklets to explain its cumbersome requirements, and is known for gems like this one, explaining who must file Form 8-IMY:
“A foreign person, or a foreign branch of a U.S. person [emphasis added], to establish that it is a qualified intermediary that is not acting for its own account, to represent that it has provided or will provide a withholding statement, as required, and, if applicable, to represent that it has assumed primary withholding responsibility under Chapter 3 of the Code (excluding section 1446) and/or primary Form 1099 reporting and backup withholding responsibility.”
How can anyone be expected to accurately figure out their taxes after reading pages upon pages of instructions of that ilk?
Or try reading this IRS instruction to determine whether a dividend is a qualified dividend or not:
“Some dividends may be reported as qualified dividends in box 1b of Form 1099-DIV but are not qualified dividends. These include:
…Dividends attributable to periods totaling more than 365 days that you received on any share of preferred stock held for less than 91 days during the 181-day period that began 90 days before the ex-dividend date. When counting the number of days you held the stock, you cannot count certain days during which your risk of loss was diminished (emphasis added). See Pub. 550 for more details. Preferred dividends attributable to periods totaling less than 367 days are subject to the 61-day holding period rule on this page. “
It comes as no surprise to me that Tom Daschle and Timothy Geither cannot figure out how to correctly fill out their tax forms. Welcome to the USA, fellas.
Sources: http://www.latimes.com/news/nationworld/washingtondc/la-na-obama-cabinet3-2009feb03,0,5899446.story; http://online.wsj.com/article/SB123198429552584175.html?mod=djemEditorialPage; IRS instructions for Form 1099.